techpacific.com, a Hong Kong-based online venture capital company specializing in technology start-ups, hopes to raise as much as US$65 million (HK$506 million) through an initial public share offering. It will use the funds to invest in young tech companies, expand throughout Asia and increase awareness of its brand.
The company, formed just over a year ago, will sell 300 million new shares at a price to be set between HK$1.38 and HK$1.68 a share, on April 10. Only 10% of the shares will be available to the public. The rest will be placed with institutions. Trading in the shares is set to begin April 17.
techpacific, which made a profit of $100 million in 1999, will list its shares on Hong Kong's newly-created Growth Enterprise Market, designed for young, often unprofitable companies. The listing comes as investors are increasingly turning away from volatile technology stocks. The GEM Index, which comprises 18 stocks so far, has fallen more than 30% since its inception in mid-March. Some analysts say techpacific's offer could suffer as a result.
"Market sentiment is not very good for IPOs right now, so I'm afraid the response will not be very good towards this stock," says Serine Li, an analyst at Celestial Asia Securities Holdings in Hong Kong.
Johnny Chan, the company's chief executive, says he is not concerned about current market volatility.
"Our business is based upon talent and is independent of market movements," he says. "We focus on very early stage development. If the current market conditions are the same in two years then we could be affected because some of our companies will be coming to market."
A risky business
Some, though, are looking to come to the market much earlier. Netease.com, a Beijing-based provider of Chinese language internet services, is one of 30 companies techpacific is nurturing. Last month, Netease said it plans to raise as much as US$120 million by selling 7.5 million American depositary receipts in the US. Each ADR will represent 60 ordinary shares.
Still, Chan says not every company will be looking to realize its value through a share listing.
"We believe a lot of our companies may not be subject to an IPO but may be bought out in their last stage of development. The reality is that very few companies wanting to list are actually going to get listed."
Either way, venture capitalism is by nature a risky business and techpacific faces stiff competition.
"There's no entry barrier, and whether it succeeds will depend on the management," says Celestial's Li. "Although techpacific's management is very good, there are many venture capitalists out there."
The company, whose current investors include Japan's Softbank Internet Fund, Draper Fisher Jurvetson, a Silicon Valley venture capital company, Dell Computer Corp, GE Capital, Regent Pacific Group, Fidelity International and Brierley Investments, says it will use part of the money it raises to hire additional staff.
It has already hired David Kim, a former partner with Softbank China Venture Capital and Softbank Ventures Korea, to head up techpacific's capital markets strategy. Before moving to Softbank, Kim was chief financial officer at China.com, where he helped oversee that company's successful listing on Nasdaq.
"With the addition of David Kim, we're reinforcing our position as the market leader in discovering and creating value in Asia's tech sector," says Ilyas Khan, co-founder and managing director of techpacific.
April 4, 2000