21Vianet jumps 25% in US debut

21Vianet raises $195 million after pricing its US IPO 25% above the initial top of the range — and at 37 times estimated 2012 net earnings.

Strong demand pushed shares in 21Vianet 25% higher on their trading debut, even after the Chinese internet data service provider fixed the offering price higher than the initial top end of the range.

The stock ended its first day of trading on Nasdaq last Thursday (US time) at $18.80, up from its IPO price of $15, which was already higher than its proposed range. The company raised 40% more than it originally planned, helped by pent-up demand for shares in China’s internet industry.

Renren, a Chinese Facebook clone currently in the market for a $584 million US IPO, is also finding good demand. Indeed, it attracted enough orders to cover the deal multiple times by the second day of bookbuilding, according to sources.

Others are looking to cash in on that momentum. Jiayuan.com International, the operator of an online dating platform in China, is looking to raise up to $100 million through a Nasdaq IPO. The company has appointed Citi and BoA Merrill Lynch as underwriters on the deal. Kaixin001.com, Renren’s domestic competitor and another copycat of Facebook, is also preparing a US listing.

21Vianet raised $195 million by selling 13 million American depositary shares (ADSs) for $15 each. Each ADS represents six class-A ordinary shares. This values the company at 16 times its forecast 2012 Ebitda (earnings before interest, taxes, depreciation and amortisation) and 37 times its estimated 2012 net earnings, which is a premium compared to other US and international data centre companies, according to sources.

“The valuations that certain [Chinese] companies can achieve in the US makes it very attractive for them tolist in the US,” said David Roberts, a partner at US law firm O’Melveny & Myers, in a recent interview with FinanceAsia. “The pipeline of proposed offerings [by Chinese companies] appears very strong for 2011.”

21Vianet at first planned to sell 11.5 million ADSs at the price range of $10 to $12 per share, aiming to raise between $115 million and $138 million. However, it lifted the number of shares last Wednesday to 12.5 million ADSs, with the price band increased to $12 to $13 each, according to a stock filing to the US SEC.

Chinese internet companies have received strong interest from US investors since last year, despite the fact that many of them barely make any profit and, in the cases of Renren and Kaixin001, are merely imitations of their US rivals.

21Vianet has been operating at a loss for the past three years. Although its revenues rose in both 2009 and 2010, its net losses widened to Rmb234.7 million ($35.6 million) last year from around Rmb17 million in 2008 due to growing overhead costs.

The Beijing-based company, which started operations in 1999, hosts customers’ servers and networking equipment and provides interconnectivity that helps to improve the performance, availability and security of internet infrastructure. It offers network services to increase the speed and reliability of data across the internet.

It plans to use the proceeds from the IPO to expand its data centre and network infrastructure, according to a filing with the SEC.

21Vianet is the second Chinese internet company in just two months to raise more than initially targeted. Last month, Qihoo 360, a Chinese provider of internet and mobile security products, raised $175.6 million after pricing its US IPO 16% above the top of the range at $14.50. The stock rose 134% above its IPO price in its trading debut on the New York Stock Exchange.

Barclays, J.P. Morgan and Morgan Stanley led 21Vianet’s deal.

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