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China’s official media groups, whose typical priority is spreading government propaganda, have been assigned new political tasks — seeking investors.
People’s Daily Online, which operates the website of China’s most authoritative newspaper, is looking to raise up to Rmb527 million ($83 million) and list on the Shanghai Stock Exchange. China’s securities regulator approved its listing application on Friday.
Xinhuanet, the news portal controlled by the official Xinhua News Agency, is reported to have hired CICC for a Shanghai IPO as well.
The People’s Daily website IPO is small but, significantly, it is the first time that the Communist government has allowed investment in the editorial arm of a state-run media firm, which until now have always been under strict government control.
People’s Daily was founded in 1948 as the Chinese Communist Party’s official newspaper. The calligraphy used on the paper’s masthead was handwritten by Mao Zedong and its editorials soon came to be recognised as the voice of the government.
People’s Daily Online is a household name in China, but like other official media in the country, it operates more like a government entity than a commercial enterprise. And, as such, it may struggle to convince investors of its profit-earning potential.
For the first half of 2011, the website earned Rmb211 million in revenues and had a net profit of Rmb30 million, with a big portion of its income coming from government announcements rather than businesses paying for advertising space. It had total net assets of Rmb574 million by the middle of last year, according to an IPO prospectus.
The web operator will offer a 25% stake, or 69.1 million shares, and proceeds from the offering will be used to upgrade networks and content, according to a statement on the website of China Securities Regulatory Commission. It did not disclose details on the possible price range. Citic Securities is managing the deal.
The web portal is 80% owned by People’s Daily, while state-owned carriers including China Mobile Communications, China United Network Communications and China Telecommunications are among shareholders in the company.
The government has given considerable financial aid to its top media groups in a bid to increase their influence abroad while retaining their prominence at home. People’s Daily launched its website in a bid to compete with domestic rivals Sina.com and Sohu.com, but state-run media have proven less popular despite the government’s efforts.
People’s Daily Online was the 50th most-popular website in China on August 22, compared to Sina, which ranked at fourth and Sohu at seventh that day, according to the IPO prospectus.
News of the People’s Daily Online IPO triggered a great deal of debate in China, with many questioning why a business with strong government support needs to raise capital in the market. Also, the company’s revenue relies heavily on government contracts, making it difficult to see meaningful growth in the business.
The A-share market has stayed weak during the opening days of 2012, and primary market sentiment is also gloomy. Longmaster Information & Technology, a Chinese developer of software, was forced to pull its planned IPO on Wednesday because it failed to attract enough institutional subscribers.
There were about 277 IPOs in the A-share market during 2011 with three-quarters of new share issuers seeing their shares fall to below the IPO price on the first day of trading.
