Saturday, January 4 will conclude the 25 day "quiet period" on underwriter research following the December 10 IPO of Chinese online automotive consumer resource Autohome (ATHM).
The firm's IPO underwriters will be permitted to release research reports on ATHM into the market with the expiration of the quiet period, likely leading to at least a brief increase in the price of ATHM shares.
Autohome's extremely successful IPO, which beat its upwardly revised expected price range of $14-$16 per share with a pricing of $17 per share, was followed by an explosive first day of trading that netted a 76.9% return. After holding steady at approximately $27-$29 for two weeks, ATHM took off again after Christmas Day, and closed at $34.91 per share as of December 27. See our prior report here.
The firm's underwriters, including Deutsche Bank (DB), Goldman Sachs (GS) , Oppenheimer and Piper Jaffray, will seek to take advantage of ATHM's impressive debut and recent success with significant releases of positive research information beginning around the fourth of January.
Both recent academic research and the past two years of our own work have generated empirical evidence of a correlation between the visibility and quantity of a firm's IPO underwriters and a temporary rise in the price of the firm's shares at the expiration of the quiet period.
Generally, the increase in price will begin a few days in advance of the actual expiration, as investors recognize that underwriters are about to release positive information and begin to purchase shares to take advantage of the potential price increase to come; these early buys create the perception of demand and themselves lead to a rise in the price of shares.
ATHM runs a pair of websites, autohome.com.cn and che168.com, used by Chinese consumers for automotive research and information. According the firm's F-1 registration statement, autohome.com.cn accounted for an incredible 46% of all time Chinese consumers spent looking at online automotive information for the nine months ended September 30, 2013.
The site also was first among Chinese sites in average daily page views and average daily unique visitors, rendering the website a valued advertising destination for the Chinese automotive industry. Approximately four out of five the more than 80 Chinese automakers placed advertisements on ATHM's websites in the nine months ended September 30, 2013 and in calendar 2010, 2011, and 2012.
James Zhi Qin has been ATHM's CEO since 2009. His previous work includes a stint as COO of 265.com, time with McKinsey & Company as an associate, and work with Northern Telecom Limited as a software engineer.
ATHM's meteoric start on the market comes as no surprise given the firm's sustained success and dominant market share. The firm has continued to improve both its revenue and its bottom line by leaps and bounds, nearly doubling its income for the nine months ended September 30, 2013 from the same period a year earlier and nearly tripling its income between 2010 and 2012.
Aggressive investors may want to take advantage of the likely bump in price resulting from the expiration of the quiet period.