The other Chinese IPO was the small-cap NIVS IntelliMedia Technology Group (NYSE-Alt: NIV) offering that was priced on March 13.
Changyou.com is expected to be priced on Wednesday evening, April 1, which is, of course, April Fool’s Day, and to trade on Thursday, April 2.
There was a time in the not too distant past that there were no Chinese IPOs sailing into the New York City Harbor.
The earliest sightings date back to the start of the 20th Century when the then-Chinese government and railway companies sold gold-backed bonds to American investors. By the late 1940s, the flow of Chinese bond offerings ended — a casualty of war and politics. And, not surprisingly, the old Chinese government and railway companies no longer exist. However, it was not a total loss for the investors.
These certificates have value in the obsolete securities corner of Wall Street. They are collector’s items.
Recent Chinese History
By 1996, things had turned around and the doors opened to Chinese IPOs. Fittingly, the first was a railroad company.
Guangshen Railway Co. Ltd. (NYSE: GSH) priced its IPO at $19 per American Depositary Share (ADS) and it made its debut on the New York Stock Exchange on May 13, 1996. The IPO “took a Brodie,” an old Wall Street term for a stock that tanks. Guangshen closed its opening day at $17.01 per ADS, DOWN 10.5 percent from its initial offering price. The stock is still under water, closing at $16.82 on March 27, 2009.
Since 1996, another 96 Chinese companies have priced IPOs in the U.S. financial markets, according to U.S. Securities and Exchange Commission filings.
In 2007, Chinese new-issues traffic produced a record U.S. volume of 31 IPOs and another 12 each in 2000 and in 2004. There are some parallels between some of the past IPOs and this week’s offering.
Changyou.com is a fast-growing, profitable online game provider in the People’s Republic of China, according to its prospectus. For the year ended 2008, Changyou.com reported net income of US$108 million on revenues of US$201.8 million.
In 2000, two Chinese online game providers made their debuts in the United States:
- NetEase (Nasdaq: NTES) priced 4.5 million shares at $15.50 each on June 30, 2000. It closed its opening day at $12.13. (On March 6, 2006, the stock split 4 for 1, adjusting its offering price to US$3.88 per ADS.) On Friday, March 27, 2009, NetEase closed at $24.60, UP 534.8 percent from its initial offering price. For the year ended 2008, NetEase reported net income of US$234 million on revenues of US$452.1 million, according to published reports.
- SINA (Nasdaq: SINA) priced 4 million shares at $17 each on April 20. It closed its opening day at $20.69. On Friday, March 27, 2009, SINA closed at $23.28, UP 36.9 percent from its initial offering price. For the year ended 2008, SINA reported net income of US$102.3 million on revenues of US$369.6 million.
Moving forward to 2004, another two Chinese online game providers made their debuts in the United States:
- Shanda Interactive Entertainment (Nasdaq: SNDA) priced 13.9 million shares at $11.50 each on May 11, 2004. It closed its opening day at $11.97. On Friday, March 27, 2009, Shanda closed at $36.78, UP 240.6 percent from its initial offering price. For the year ended 2008, Shanda reported net income of US$182.7 million on revenues of US$522.2 million.
- The9 Limited (Nasdaq: NCTY) priced 6.1 million shares at $17 each on Dec. 14. It closed its opening day at $21. On Friday, March 27, 2009, The9 closed at $13.83, DOWN 18.6 percent from its initial offering price. For the year ended 2008, The9 reported net income of US$51.1 million on revenues of US$262.2 million.
And on to 2007, two more two Chinese online game providers made their debuts in the United States:
- Giant Interactive Group (NYSE: GA) priced 51.2 million shares at $15.50 each on Oct. 3, 2007. It closed its opening day at $18.23. On Friday, March 27, 2009, Giant Interactive closed at $6.91, DOWN 55.5 percent from its initial offering price. For the year ended 2008, Giant Interactive reported net income of US$162.9 million on revenues of US$233.3 million.
- Perfect World (Nasdaq: PWRD) priced 11.8 million shares at $16 each on July 25. It closed its opening day at $20.40. On Friday, March 27, 2009, Perfect World closed at $14.18, DOWN 12.1 percent from its initial offering price. For the year ended 2008, Perfect World reported net income of US$94.75 million on revenues of US$210.7 million.
Sohu to Stay in the Game
Now let’s turn back to the present and this week’s offering. Changyou.com’s bankers plan to price 7.5 million ADS at $14 to $16 each. Each ADS represents two Class A ordinary shares of common stock.
Note: Sohu.com will be selling 7.5 million ordinary shares, which equals 3.75 million ADS. After the offering, Sohu.com will still own about 70.7 percent of the outstanding shares of Changyou.com.
IPOScoop.com subscribers will be notified, by emails, as to any changes in the proposed pricing terms and updated SCOOP ratings. For current SCOOP rating, please log in.