Baidu unit seeks New York IPO, drawn by rally for China tech stocks

Reuters

By Denny Thomas and Elzio Barreto

HONG KONG, Oct 2 (Reuters) - A Baidu Inc unit isseeking to raise $125 million by listing in the United States,where strong investor appetite for Chinese Internet stocks istrumping lingering concerns about accounting irregularities fromChina-based companies.

Qunar Cayman Islands, which provides online travel services,would be the fourth company based in China to look to U.S.exchanges this year and its planned New York offering would bethe biggest U.S. IPO by a Chinese firm in two years.

In 2011, a series of research reports and accountingirregularities hit U.S.-listed Chinese companies, sparking awave of delistings and prompting high-level talks betweenregulators in Washington and Beijing about handing over keydocuments that continue today.

While investors have not entirely forgotten those issues,they can also see there is money to made in China, said a HongKong-based investment banker.

"There's been big wins, so people will take a look at itagain," the banker said.

The technology-heavy Nasdaq's Composite Index is up26 percent so far this year, and Chinese firms are particularlyin favour with Baidu, the country's largest search engineprovider, up nearly 60 percent.

That compares to a 2 percent rise in the Hang Seng index and a 13.2 percent rise in MSCI's world equity index.

Alibaba Group Holding Ltd, China's biggest e-commercecompany, is also looking to take its up to $15 billion IPO tothe United States and should Alibaba successfully list there,that will only bolster the case for China's tech industry toseek similar offerings.

The number of new listings of Chinese companies in the U.S.peaked in 2010 when 40 companies went public, raising $4billion, according to Thomson Reuters data. The next year, thenumber of deals fell to 15 and in 2012 only two Chinesecompanies listed there.

Several of the Chinese companies that delisted starting in2011 were those that became public through what's known as areverse-takeover, a legal public offering process that, however,is open to accounting and transparency abuses. Such listings area rarity now.

Baidu acquired a majority stake in Qunar, which means "whereare you going" in Chinese, in 2011 for $306 million, but thecompany has yet to turn a profit, according to filings.

Chinese e-commerce is booming on an expanding middle classand rising disposable incomes. Morgan Stanley estimates China'smobile Internet market could more than treble to around $30billion by 2015.

Qunar's online customers grew to 203.2 million in the yearto June 2013, from 187.3 million at the end of 2012. Its netloss narrowed to 16.9 million yuan ($2.76 million), the filingsshow.

All the three Chinese company that listed in the U.S. thisyear have done well.

LightInTheBox Holding Co, a Beijing-based onlineretailer, raised $78.9 million in a June IPO on the New YorkStock Exchange and its shares have risen 27 percent since thedeal.

China's Montage Technology Group Ltd has seen itsstock surge 37 percent since its $71 million September IPO onthe Nasdaq while China Commercial Credit, amicro-credit lender, has seen its shares rise 46 percent sinceits Nasdaq debut in August.

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