Asia takes center stage in flat IPO market
The continent will grab center stage this week, as one of its larger initial public offerings makes its United States debut, along with a closely watched portal from India.
| IPOs on tap | |
| |
| *price information may change |
China Unicom, the second-largest telecommunications company in China, is expected to raise upward of $4.6 billion based on the high end of its $14.76 to $18.61 pricing range and 245.9 million American depository shares and stock it will offer.
China Unicom is expected to be the second-largest IPO in the United States this year, behind AT&T Wireless, which raised a record-setting $10.6 billion in April.
The large telco will attempt to debut at a time when the markets are weak, a fate that AT&T Wireless also experienced, but to a lesser degree.
Rediff.com India also is expected to debut next week, one of nine deals scheduled, and could raise nearly $5 billion.
If the recent past is any indication, the pricing range on many of the deals is likely to fall below the initial range.
"In June, six of seven deals have come in below their range. And last May, 25 out of 33 deals came to market below their range," said Richard Peterson, an analyst with Thomson Financial Securities Data.
China Unicom, while it may price within its range, might have a hard time rising more than two to three points above its IPO price, Peterson noted.
"On average, first-day gains for Asian IPOs that trade in the U.S. has been 27 percent," he noted.
China Unicom generated revenues of $2 billion last year and posted profits of $89 million. It had 4.2 million cellular customers at the end of last year--up from 338,900 in 1997, making it the second-largest cellular services provider in Asia.
China Unicom, which competes directly with China Telecom, also is the largest paging company in Asia and offers data services in 50 cities in China. The company plans to use some of the proceeds from its IPO to expand its operations to 220 cities by the end of the year.
The IPO is being underwritten by Morgan Stanley Dean Witter; the shares will trade under the ticker "CHU."
Meanwhile, Rediff.com India is expected to capture investors' attention because of the anticipated growth in India's Internet efforts and the backing of Goldman Sachs as the lead underwriter, IPO analysts said.
Rediff hopes to raise up to $55.2 million based on the high end of its $10 to $12 pricing range and 4.6 million American depository shares it will offer. The portal, which offers 17 channels, from community features to online shopping, plans to trade under the ticker "REDF."
"While there are less than 2 million Internet users in India, the support from the government (such as ISP deregulation), as well as local content proliferation, will rapidly take the Internet in India to the mainstream," according to a recent Goldman Sachs report.
International Data Corp. estimates there were roughly 1 million Internet users last year in India, a figure that is expected to grow to 17.2 million by 2004.
And the interest in portals is expected to rise, after Satyam Infoway took a 24.5 percent stake in IndiaWorld Communications last November.
Satyam Infoway, an Internet service provider, is parent to Satyam Online, a competitor to Rediff. Satyam was the first and largest ISP in India, and market watchers suspect the company will make further investments in similar companies.
Rediff generated revenues of $1.9 million for the year ended March 31, up from $855,000 a year ago. The company posted a loss of $6.7 million for the year, up from $985,000 a year earlier.