February 12, 2008

Review of 2007 China IPOs in US Market

Filed under: Stats — Administrator @ 3:48 pm

I received Morgan Stanley’s Year-end 2007 Capital Markets Review from my friend Mark Pols the other day. Below are some of the more interesting factoids from the report.

In 2007, U.S. IPO issuance volume of Chinese companies increased dramatically:

  • 29 Chinese companies were listed in U.S., raising US$6.8bn in total;
  • 2007 saw a much more diversified set of companies choosing to list in U.S.;
  • Of the 29 issuers, only 34% were from traditional technology sector compared to 63% in 2004 and 100% in 2000;
  • Other industries include healthcare, telecom, consumer retail, real estate, professional services, and financials;
  • More companies chose for NYSE listing versus NASDAQ listing, 18 in 2007 compared 3 out of 8 in 2006.

Strong technology markets led to high private company valuations:

  • Deals priced in 2H07 up to 11/8/07 achieved 2008 PE multiple of 24.3x on average;
  • Valuation level dropped for deals priced between 11/8/07 and year end amid subprime concerns and broader market correction;
  • Deals priced during that time period averaged 2008 PE multiple of 11.2x;
  • “Superior execution” (Morgan Stanley’s words) was required to justify valuation and sustain aftermarket trading momentum;
  • Mean and median performance from offer to 12/31/07 were 31.3% and 1.6%, respectively.

Morgan Stanley concludes that growth in IPO and secondary volumes expected to subside in 2008 but remains open for high quality issuers with decent visibility in the business.

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