Tarena International, a provider of IT professional education services in China, has priced its $137.7 million Nasdaq listing at $9 per American Depositary Share, setting a favourable precedent as US stock markets gear up for a wave of Chinese technology offerings.
The initial public offering of shares, priced in the middle of its $8-$10 pricing range, attracted considerable interest from investors and the book was covered an unspecified number of times, according to two sources close to the deal.
One of the sources added that the bookrunners Credit Suisse and Goldman Sachs could have priced the deal at the top end of its indicative range but that they decided against it at the last minute to ensure a strong aftermarket performance. The shares will begin trading at the US open on Thursday.
The Tarena offering comprises 15.3 million ADSs, three quarters of which are from the company, with the rest coming from existing shareholders IDG Technology and JAFCO Asia Technology Fund.
The offering also secured NYSE-listed language education institution New Oriental Education & Technology Group as a cornerstone investor for a subscription of $13.5 million.
Chinese IPO rush
Tarena’s initial public offering of shares, the first sizable Chinese listing so far this year, paves the way for the coming deluge of Chinese technology-related IPOs expected this quarter.
Two larger companies are marketing their US offerings and expected to kick off the roadshows as soon as this month. Leju, an online-to-offline (O2O) real estate services provider jointly owned by E-House and Tencent, is looking to raise $200 million in New York, while Sina- and Alibaba-backed Weibo, China's version of Twitter, has plans for a $500 million Nasdaq IPO.
Chinese cosmetics retailer Jumei.com has also submitted confidential files for a $600 million US IPO, which means it could embark on a roadshow this month as soon as this month.
The $1.5 billion offering of China’s second-largest online retailer JD.com hasn’t firmed up its timetable but one source close to the company said the deal is expected to complete before summer. The company unveiled its jumbo listing plan in February and has already drawn Tencent to take 15% of its shares for $215 million and another 5% after the IPO.
Other potential Chinese market debutantes eyeing the US market include mobile chat and gaming company Momo, which is mulling a $200 million listing, mobile gaming distributor I Dream Sky with its $150 million offering, and Cheetah Mobile, a security software business spun off by Hong Kong-listed Kingsoft that is eyeing a $300 million NYSE listing.
Chinese technology-related issuers have always been fond of the US market due to the higher valuations that can be achieved.
The last rush of Chinese company IPOs in the US was in 2010 when e-commerce company Dangdang, online television platform Youku and Tudou, internet security service provider Qihoo 360 and social network Renren.com all floated their shares, which subsequently rocketed in price.
However, that window soon shut as allegations of auditing fraud and worries about the low standard of Chinese corporate governance emerged.
Window reopens
The market has slowly recovered since 2012. Of the nine sizable Chinese technology companies that have listed in the US since then, eight have performed well in 30 days since listing, with an average share price increase of 61%, according to data service provider S&P Capital IQ. Vipshop, an online e-commerce site, fell 8% in the 30 days after its 2012 IPO but its shares have since surged by 2,360%.
US stock markets offer Chinese technology companies greater flexibility than is available in Hong Kong or mainland China, such as dual-class ownership structures and the ability to list without a profit track record. They also offer much deeper levels of liquidity.
Chinese e-commerce giant Alibaba Group said in mid-March that it had decided to pursue its long-awaited blockbuster IPO in the US instead of Hong Kong. The deal could fetch as much as $15 billion, according to analysts.
Credit Suisse and Goldman Sachs are helping in Weibo’s deal, while Credit Suisse and JP Morgan are handling the offering of Leju.
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