China’s answer to Amazon.com is targeting a U.S. initial public offering of up to $5 billion next year, despite U.S. investor wariness toward Chinese firms.
A decision by Beijing-based online retailer Jingdong Mall to shun the Hong Kong market, the most popular venue for Asian firms, may be a bet that Internet investors are savvier in the U.S. and may be more willing to give the company a heftier valuation. Asia has few large Internet stocks. The IPO, if it materializes, would be far larger than the listing of Google Inc., which holds the record for the largest U.S. Internet IPO at $1.9 billion in 2004, and of Internet-related offerings elsewhere in the world.
The company, also known by the name of 360buy.com, plans to raise $4 billion to $5 billion in an IPO tentatively scheduled for the first half of 2012, according to IFR, a Thomson Reuters publication.
An IPO of that size would surpass Google's (GOOG) $1.9 billion IPO in 2004 as the largest-ever Internet float in the United States, according to Thomson Reuters data.
Jingdong is scheduled to hold a "beauty parade" next week in Beijing to pick underwriters for the IPO, IFR said on Wednesday, citing sources familiar with the matter.
One of the sources said the IPO could exceed $5 billion, depending on its final timing.
The ramp-up to the IPO comes as the U.S. IPO market has been struggling amid volatility triggered by Europe's debt crisis and a weak domestic recovery. A number of deals were withdrawn last month.
It also comes as some U.S.-listed Chinese companies -- mainly those that listed on U.S. exchanges via reverse mergers -- have been tainted by allegations of fraudulent accounting.
"Right now, U.S. investors are very cautious about Chinese IPOs. The fact that some of those IPOs like Longtop ... basically have defaulted in the last few months -- obviously that taints the waters for all of the other Chinese IPOs," said Josef Schuster, founder of Chicago-based IPO research and investment firm IPOX Schuster.
The IPOX China 20 Index .IPCT of Chinese companies that recently went public is down about 24 percent since its peak in April, underscoring skittish investor sentiment.
STIFF COMPETITION
While China's e-commerce market is growing alongside its middle class, making it an attractive business opportunity, the market is highly fragmented and competitive. Jingdong competes not only with Taobao Mall (www.taobao.com), but also with E-Commerce China Dangdang Inc (DANG).
Established in 2004, Jingdong is China's second-largest online retailer behind Taobao, according to the latest Analysys International research.
Some analysts are skeptical about the ability of Chinese e-commerce companies to make a profit in the near term as the market is hugely fragmented.
Jingdong has about 15 million registered users. It is not currently profitable, but founder and CEO Liu Qiangdong has said the company is expected to become profitable in the second half of 2012.
Jingdong's revenue is expected to reach 28 billion yen ($4.4 billion) by the end of 2011, up from 10 billion yen at the end of 2010.
Jingdong raised $1.5 billion in a third round of funding in April, which valued the company at $10 billion, IFR said. Russia's Digital Sky Technologies and Tiger Fund are among the investors in the company.
Jingdong could not be reached for an immediate comment.
Before the accounting frauds, U.S.-listed Chinese Internet stocks were a big hit among investors.
Chinese social network company Renren (RENN) traded at nearly 80 times annualized sales in 2010 when it went public in May, with other Internet companies such as Jiayuan.com International Ltd (DATE) and NetQin Mobile Inc (NQ) also trading at high valuations, analysts said.
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