The Beijing-based advertising agent was due to fix its initial public offering price after the close of trading on Thursday and was meant to start trading on Friday, but instead, the company issued a new prospectus on Friday informing potential investors that it had increased its ratio of American Depositary Shares (ADS) to ordinary shares from 15 to 30. However, it has lifted the absolute price range only marginally, resulting in a significantly smaller deal.
A new timetable for the listing has yet to be released, but sources say the pricing is likely to take place over the next couple of days. Merrill Lynch is the sole bookrunner for the offering.
Initially the company offered to sell 14.42 million ADS, representing 216 million ordinary shares, at a price between $5.20 and $7.20 per ADS. According to the amended prospectus, the IPO now consists of 7.21 million ADS, representing the same number of ordinary shares, which will be offered at a price of $6.80 to $7.80 apiece. This means the maximum amount it can raise from the IPO (before the greenshoe) has dropped to $56.2 million from $103.9 million. The bottom end of the range now translates to a minimum deal size of $49 million û some 35% below the initial $75 million target.
The 15% greenshoe can boost the total deal size to $65 million if exercised in full.
CMM was the second US IPO by a Chinese company to produce a disappointing result last week after China Distance Education Holdings (CDEL) lowered its original price range by 22% and then priced at the bottom of the new range. The company, which offers online test preparation courses for professional certifications in a variety of industries, raised $61.25 million, compared with an initial target of $97.25 million. CDEL fell 12% in the first two sessions after its Wednesday trading debut, but rebounded slightly on Friday to finish 9.1% below its IPO price. According to bankers, the Chinese company, which was brought to market by Citi and Merrill Lynch, was the only newcomer to the US markets in a week that was marked by massive swings between gains and losses. The Dow Jones index fell 0.4% over the five-day period, but shed 2.2% on Thursday and Friday combined to end the week on a negative tone.
CMM is a television advertising company that is very similar to SinoMedia Holdings, another China-based advertiser that listed in Hong Kong at the beginning of July. Although both companies have similar business models û they both make nearly all of their income selling advertising slots on CCTV, China's state owned television network û SinnoMedia came to market at a slightly more favourable time, and was able to raise $47 million. Since its July 8 debut its share price has fallen 9.5%, however.
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