China Real Estate shares jump 20 pct in IPO

By JORDAN ROBERTSON

posted: 40 DAYS 8 HOURS AGO

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SAN FRANCISCO -In a surprise for the IPO market, shares of China Real Estate Information Corp. leaped as much as 20 percent Friday in their first day of trading.

The pop in the database and consulting company's stock suggests that investors are keen to get a piece of the booming Chinese real estate market, and that a flurry of other initial public offerings of stock on deck for the next two weeks might also find a warm greeting on Wall Street.

The biggest planned offerings include energy company AEI, Dole Food Co. and medical device maker AGA Medical Holdings.

China Real Estate's stock apparently benefited from the broader market's run-up this week and what wound up being smart pricing of its shares.

Investors are digesting a mixed bag of earnings reports for the July-September quarter that have boosted the overall market, despite lingering signs of distress from the recession. The optimism was reflected in the Dow Jones industrial average's ascent above 10,000 earlier this week, the first time in a year it reached that mark.

Experts say the market's improvement likely helped China Real Estate's IPO, along with the fact the IPO was reasonably priced, at $12 per share, near the low end of its expected range of $11.80 to $13.80.

The Shanghai-based company, which sells data and consulting services to real estate developers in China, has said the offering of 18 million American depositary shares will raise $216 million. The U.S.-traded ADS represents one ordinary share of the company.

The stock, which trades on the Nasdaq under the "CRIC" ticker, rose as much as $2.40, or 20 percent, to $14.40 in intraday trading Friday. It closed at $14.20, up 18 percent from its offering price.

"It certainly surprised the experts — they were all badmouthing the stock. That's why it initially came in on the low end," said John Fitzgibbon Jr., founder of IPO Scoop, which tracks IPOs. "This was a big surprise, a happy surprise. They hit an unexpected home run."

Fitzgibbon said investors had been rattled by some earlier IPOs of Chinese companies, particularly the September debut of online gaming company Shanda Games Ltd., which raised $1 billion in one of the year's biggest IPOs but whose stock has fallen more than 17 percent. Fitzgibbon said too many shares were offered and the price was too high.

"That was a wakeup call. That was a shocker," he said, adding that sentiment about IPOs has been improving as the market has risen. "The window has been cracking open lately. It's been a long time coming."

Thirty-nine companies have gone public in the U.S. this year, according to Fitzgibbon's firm. The stock for most of them is up. The stock prices for the group of IPOs is up nearly 17 percent.

The biggest gainer on a percentage basis has been Duoyuan Global Water Inc., a Chinese company that makes water-treatment equipment. Its stock has more than doubled its June pricing of $16 to close at $39.38 today. The biggest deal overall was last week's debut of Spanish financial giant Banco Santander SA, which raised $8.1 billion with an offering of shares in its Brazilian subsidiary. It was the largest IPO in the world this year. The stock is up about 3 percent.

Nick Einhorn, a research analyst with the Greenwich, Conn.-based Renaissance Capital research firm, said the performance of China Real Estate's stock shows that investors are looking for long-term growth in Chinese real estate. He said it also helps that it has ties to corporations well-known by U.S. investors, and the price was right.

Real estate services company E-House Holdings Ltd. owns more than half of China Real Estate's shares, and online portal Sina Corp. owns about a third of the company. E-House and Sina are also listed in the U.S.

"They priced it prudently and the stock has worked because of it," he said. "Certainly it's easier to go public when the market is doing well. You can successfully go public in a bad market, but it's tougher. It's one more obstacle to overcome."

He said IPO performance is likely to stay mixed in the near future.

"It shows the kind of market we're in. Obviously people have been more encouraged in general about the economy, which has helped the IPO market. But investors are still being selective."

2009-10-16 16:35:59