Muddy Waters call boost investor confidence in Chinese IPOs - analyst

By Rizza Sta. Ana

Nov 25, 2013 02:15 AM EST

The increase in scrutiny in Chinese firms have not deferred their plans to debut on the stock market. On the US stock market this month alone, three Chinese firms have raised a collective amount of USD345.5 million, the biggest seen since May 2011 said Bloomberg, which had based its figures from collected data.

Two years ago in May, the US bourse saw six companies who raised a combined USD75.2 million in its initial public offering. Android applications maker Sungy Mobile Ltd sold 7 million of its shares then at USD11. 22 per share. 58.com Inc, which is an online market equivalent to US' Craigslist.com, and travel agency Qunar Cayman Islands Ltd were able to sell its shares then above its expected pricing since October 30.

Chicago- based IPOX Schuster LLC founder Josef Schuster said over the phone on November 21, "The average IPO out of China is definitely much more scrutinized than it used to be and that's helping to improve investor confidence in those deals. Some of the deals, they are backed by U.S. venture capital and are brought out by high-profile U.S. underwriters which cannot afford to bring a bad company to the market."

Chinese companies were put on the spotlight after Muddy Waters Research LLC claimed that some of them, including Sino-Forest Corp misstate information regarding their assets. Due to the claims of the research firm, Beijing-based NQ Mobile Inc's shares dropped 62% on the stock exchange. NQ argued Muddy Waters claim by depositing USD103 million in cash to a Standard Chartered Bank account to prove its viability.

Despite the pressure from short sellers like Muddy Waters, 500.com Chiefe Financial Officer Zhengming Pan was confident that it did not mar investor confidence in Chinese companies.

Pan said over the phone at the New York Stock Exchange on November 22, "We wanted to be together with the other Internet plays from China. We will get better research coverage and we will have a better investor base." 500.com debuted at USD13 per share, which is the maximum price of their expected price range.

Sina Corp, which owned China's Twitter, Weibo, saw its value at more than quadruple its former amount since its debut in 2000. Chinese search engine Baidu saw its shares rallied 5,767% after debuting in 2005.

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