The Chinese are still coming, and so are the investors. Despite signs that the fervour for initial public offerings might be waning a bit, shares of Weibo, the Twitter-like Chinese microblogging service, surged 19 per cent in their first day of trading on Thursday. And another Chinese company, the real estate website Leju, enjoyed nearly as big a pop.
The warm welcomes come ahead of the expected debuts of even bigger Chinese internet players - particularly the Alibaba Group, the online marketplace that is part eBay, part Amazon.com and wholly dominant in that country. The company is expected to file for an IPO as soon as next week; it is expected to be one of the world's biggest since Facebook raised $16 billion two years ago.
Also on deck is JD.com, a smaller online retailer allied with another of China's online behemoths, the video game and messaging company Tencent. "The strong post-IPO trading in Weibo is a good indication of investor interest in Chinese internet properties," Kathleen S Smith, a principal at Renaissance Capital, wrote in an email.
Behind the interest from investors is a simple fact: The Chinese internet is huge, with potential to grow. About 618 million people use the internet in that country, or nearly twice the population of the US, according to the China Internet Network Information Center.
Yet just less than 46 per cent of Chinese are online, compared with an estimated 85 per cent of American adults. In other words, huge swaths of the country remain untapped by business.
The companies that have managed to claim online beachheads, particularly Alibaba, Tencent and the search engine Baidu, have demonstrated astonishing growth. Tencent, which is already public, posted a 38 per cent rise in revenue last year. Baidu, which trades on the Nasdaq stock market, reported a 43 per cent jump in sales.
Alibaba shows even more promise. Earlier this week, the company disclosed a 66 per cent gain in revenue for the fourth quarter, the most recent period of exceptional growth.
Leju, which posts Chinese real estate listings online for the likes of Baidu, nearly doubled sales last year, to $335.4 million. Its shares rose 18.6 per cent on Thursday.
And Weibo, which like Twitter lets users post succinct messages, has shown strong expansion as well. Its revenue more than doubled last year, to $188.3 million.
The service was started five years ago by Sina, a big Chinese internet portal, and has since become the biggest of the so-called Weibo services, with 143.8 million active users, about two-thirds the number for Twitter. And, it has started to make small inroads into Western markets, offering a program in Apple's and Google's app stores.
The company received a lift last year when Alibaba bought a minority stake, valuing it at $3.3 billion.
But Weibo has also faced headwinds. Among the risk factors it listed in its prospectus was the possibility of harm by government censorship. And it has been battling Tencent's popular WeChat messaging service.
It also sought a public listing at a time when fervour for IPOs appears to be waning somewhat. As investors began to fall out of love with fast-growing sectors like the internet and biotechnology, many prospective IPOs began to falter as well, sending indexes like the Nasdaq down sharply on some days.
An index of shares in newly public companies created by Renaissance Capital is down more than one per cent so far this year.
Weibo and several other market debutantes, including the travel technology company Sabre and the boutique investment bank Moelis & Company, responded this week by pricing their IPOs at the low end of expectations or even below a given range, as well as by trimming the number of shares sold in the offering.
On Wednesday night, for instance, Weibo priced its offering at $17 while cutting the number of shares offered by 16 per cent.
The move helped all three companies. In addition to Weibo's 19-per cent gain, Sabre's shares rose four per cent on their first day of trading and those of Moelis were up four per cent after two days of trading.
Though Weibo ended Thursday with a market value of $3 billion, lower than Alibaba's appraisal of the company, its chairman attributed the challenges to the environment rather than anything inherent in the business.
"I think it has been a tough market," the chairman, Charles Chao, told Bloomberg TV on Thursday. "But on a relative basis, we're having great results."
© 2014 The New York Times News Service
