Are U.S. IPOs Of Chinese Companies A Safe Bet On The First Day?

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Includes: COE
by: Renaissance Capital IPO Research

Even as the 2016 IPO market lags the prior year by deal count (34 IPOs; -53%), proceeds ($5.5B raised; -58%) and filings (49 submissions; -54%), US IPO activity of China-based companies has kept pace with 2015. Including Thursday's China Online Education (51Talk) (NYSE:COE), the three Chinese companies listing in the US have raised more proceeds ($204 million) than the entire class of 2015. A look at all China ADR listings since 2012 shows general safety on the first day: Only 3 of the 28 IPOs (11%) to raise more than $40 million had a negative first-day return, compared to 25% for their non-Chinese counterparts. However, first-day pops have trended down over the past two years: The five deals since 2015 have an average first-day of +5% (compared to +13% for non-China). Ahead of 51Talk's $46 million offering, it is also worth noting that the four Chinese companies that raised less than $70 million currently trade below their offer price.

US IPOs from Chinese Companies*
Year # IPOs Median
Deal Size
# Down on
First Day
Avg. First-Day
Return
Avg. Total
Return
2016 2 $130 0 +9% +13%
2015 3 $75 1 +2% +8%
2014 14 $145 1 +13% -5%
2013 7 $79 0 +47% +53%
2012 2 $77 1 -4% +1,093%

*Includes IPOs that raised more than $40 million