CNET también está disponible en español.

Ir a español

Don't show this again

Tech Industry

THE DAY AHEAD: Due diligence on isn&#039t easy Inc.'s (proposed ticker: CHINA) IPO will be a hot one, but it will also go a long way to confirming the obvious -- investors don't read a company's regulatory filings before investing in a new stock.

How do we know IPO investors aren't doing their homework when it comes to That's easy. Filings aren't easily available for, but plenty of you will go gaga for the stock. The next AOL?'s prospectus is only available on paper and supplies are short. The big investors have the prospectus, but the little guy doesn't have any options when it comes to research. Usually, any investor can find information on a company through Edgar, a Securities and Exchange Commission database on the Web.

But electronically,'s prospectus doesn't exist. It's one thing to not do your homework, but it's nice to at least have the option. Nevertheless, many investors won't look before they buy the next red hot .com.'s 4.2 million share offering price range was bumped up to $17 to $19 a share. The issue priced at $20 to trade later today.'s prospectus isn't available due to a loophole with the SEC that makes electronic filing optional for foreign-based companies. And in the future don't expect a whole lot of disclosure from Those dreaded quarterly filings may also be hard to get. Recent IPO Pacific Internet's (Nasdaq: PCNTF) filings are also unavailable on Edgar.

We discovered this filing glitch with foreign IPOs the hard way. We went on, and the SEC's version of Edgar only to find that electronic versions of filings don't necessarily exist for

As a result, many investors won't have a clue what they are buying. Of course, the lack of filings on the Web won't stop investors from driving shares into the stratosphere. All folks will be doing is taking two growing markets -- China and the Internet -- and concluding that the company must be the next hit like America Online (NYSE: AOL) and StarMedia (Nasdaq: STRM), the Latin American portal.

According to Randall Roth, an analyst with Renaissance Capital, has filed a 20F form, but many traditional resellers of data don't bother carrying the form. Is it a big deal? Only if you want to do your homework.

"The majority of people probably aren't reading the prospectus anyway," said Roth. But Roth did add that the lack of easy Web access to foreign filings could become an issue as more international companies look to tap the U.S. equity markets for funding.

"This will be hot like StarMedia," said Roth, who noted's easy Web address and first mover advantage. The company will use its IPO riches for marketing and capital expenditures.

For 1998, had sales of $3.45 million and a loss of $11 million. The risks for include the uncertainty surrounding China's political and economic systems, censorship, and the possibility that shareholders may have to jump through hoops to get the information they take for granted.

The positives include's early entry into a market where .2 percent of the country is on the Internet and connections with the government, said Roth. Of course, that government connection could also become a problem. content has to be approved by the state. Although has an alliance with the official state news agency, there's no guarantee that the portal will be cut any slack. Without getting into a political debate consider the following: Censored content could be boring content, which means users may not be that interested.