Initial public offerings (IPOs) by Chinese companies in the US have been on mute due to negative news and poor market sentiment. But it seems this chapter is about to end as some are getting ready to return to the once positive market this year.
Among them are China Auto Rental Inc, the largest vehicle-leasing agency in the country by fleet size number and popular Chinese travel website Qunar.com partly owned by internet portal Baidu.
China Auto has filed an IPO application with the New York Stock Exchange, targeting to raise a maximum of USD300 million via issuance of American depositary shares (ADS).
With a network of 520 service locations, China Auto has a rental fleet of about 26,000 vehicles, growing rapidly from only 692 vehicles by end of 2009. The fleet is about four times that of the second largest car rental company in China as of end-2011, according to China Auto’s prospectus citing German consultancy firm Roland Berger.
The company’s EBITDA (earnings before income, taxes, depreciation and amortization) for 2009, 2010 and the nine months ended September 2011 was 17.3 million renminbi, 26.3 million renminbi and 148.9 million renminbi respectively. But it posted net losses of 3.2 million renminbi, 43.3 million renminbi and 18.4 million renminbi during the same period.
The auto rental firm is planning to use the proceeds to fund vehicle acquisitions and for debt repayment. J.P. Morgan is the underwriter and book-running manager.
China Auto became the first Chinese company to file documents to the US Securities and Exchange Commission, which has announced a new rule related to filing by foreign companies. The first draft of the IPO prospectus by foreign companies submitted to the regulator will no longer be kept private, which would deter significant changes to numbers or new disclosure in the formal prospectus that is made available to the public.
Separately, Qunar.com is planning a US IPO this year but there is no time frame, chief executive officer CC Zhuang was earlier quoted in media interviews. The company broke even in 2010. US-listed Ctrip.com and Elong Inc. are the company’s biggest competitors.
There are divided views on whether US listings by Chinese companies are still possible. The last IPO attempt was made by Chinese group buying website Lashou, which failed to hit the market. There has been more stringent scrutiny on US-listed Chinese companies after a number of scandals and corporate governance issues. However, some investment bankers believe that there is still a window of opportunity for industry leaders with strong positions.
