Chinese business software company Ninetowns Digital World Trade Holdings priced a 9.6 million unit Nasdaq IPO on Thursday evening and saw the $105.6 million deal trade up 13% in early trading Friday.
With JPMorgan as lead manager, the group priced the deal at $11, midway through the $10 to $12 price range Some 6.4 million ADSs represent the sale of new shares, while 3.2 million ADSs represent selling shareholders.
Only one book, representing both institutional and retail investors, was run. It was six to seven times oversubscribed, according to one fund manager, with 10% going to retails investors, primarily high net worth individuals, and the rest to institutional investors.
In terms of geographic distribution, 80% of the demand came out of the US, and 20% came from Europe. Nobody got more than 5% of the deal, the threshold for disclosure under Nasdaq regulations.
"Investors were very responsive, but on the price sensitive side, as is often the case at this time of year," notes one specialist, adding that nobody expressed concern about the selling shareholders, who will keep the proceeds of the sale rather than spending it on the company.
The price earnings ratio was set at around 18.7 times 2005 earnings.
"That's very much in line with the pricing of other China tech IPOs this year," says one banker, referring to the likes of interactive game company Shanda, and 51job.com, which he says average 18.5 times 2005 earnings.
The company made Rmb 91.2 million ($11 million) in total net income in the first nine months of this year, up from Rmb 29.1 million last year.
There is no direct comp for the business, say specialists, since it makes a unique software which enables firms and trade-related Chinese government agencies to streamline the import-export process in China. The software permits the completion of Web-based export/import declarations to the State Administration of Quality Supervision and Inspection and Quarantine of the PRC. Using the software, the company can reduce the time required to complete the declaration process from two or more days to one hour.
Specialists said that despite the its origins, it made more sense to list the company in the US than in Hong Kong, given the superior understanding of tech issues on Nasdaq.
The company plans to roll out a similar software helping to deal with the Chinese customs shortly.