Best stock to invest in
Bottom line: Canadian Solar’s Recurrent
Energy unit is likely to make its first public filing for a New
York IPO in the next 2 weeks and should get a positive
reception, while Jumei is likely to quietly de-list from the US
in the next 3-4 months.
One of the few Chinese IPOs likely to happen in New York this
year is moving closer to the launch gate, with word of major new
financing for the power plant-building unit of solar panel maker Canadian
Solar (Nasdaq: CSIQ).
But while that IPO for Recurrent Energy moves
closer to the IPO gate, announcement of a new privatization bid
for online cosmetics seller Jumei International
(NYSE: JMEI) is far more typical for the market these days.
This pair of stories reflect a growing new reality for US-listed
Chinese companies. That reality is seeing some of China’s leading
private companies choose New York for their listings, banking on
interest from global investors seeking to buy into the China
growth story. At the same time, many smaller lesser-known Chinese
companies listed in New York have discovered US investors are far
less interested in their stories, and are privatizing with plans
to re-list and hopefully get higher valuations back in China.
Canadian Solar and Jumei quite nicely summarize this divergence.
Canadian Solar is emerging as China’s best-run and most innovative
solar panel maker, and has attracted strong investor interest as a
result. It continued its industry-leading posture last year with
its purchase of Recurrent Energy, reflecting a growing trend that
is seeing solar panel makers move into power plant construction to
boost demand for their products.
Late last year Canadian Solar disclosed it had submitted its
first confidential filing for a New York IPO by Recurrent Energy,
in an effort to separate that part of its business from its core
panel-making. (previous post) Following that disclosure,
the company has announced a steady stream of new plant-building
loans to show that Recurrent can secure the funding it needs to
build new plants that typically cost $50 million or more.
Previous loans have been for relatively small amounts in the
$30-$100 million range from big global names like RBS
and Deutsche Bank, and now the company has just
announced a $300 million loan from China’s own Ping An
Bank. (company announcement)
This particular announcement is significant for its size, and also
for its source. Ping An is one of China’s more entrepreneurial
major banks, and this announcement reflects a relatively big vote
of confidence in Recurrent and also hints at a new plant building
campaign in China.
Public Filing Coming
We have yet to see any public filings by Recurrent Energy since
Canadian Solar disclosed the IPO plan in early December. But I
suspect this new financing is aimed at creating more buzz around
Recurrent, which is mentioned by name in the announcement. That
indicates we could see the unit make its first public filing for a
New York IPO to raise $100-$200 million in the next week or two.
Next there’s the Jumei story, which nicely summarizes the
disappointment that many Chinese companies have felt on Wall
Street after holding out big hopes for US listings. The company
made its IPO nearly 2 years ago during a frenzy of new offerings,
pricing its American Depositary Shares (ADSs) at $22. But after
seeing an initial surge, the stock has moved steadily downward as
investors lost interest, and now it trades at just $6.21.
The shares were trading even lower at $5.11 just last week, but
rallied after Jumei announced a management led buyout plan to take
the company private at $7 per ADS. (company announcement;
Chinese article) There’s not
much more to say about this deal, except that Jumei management is
getting a good deal by buying its shares for one-third of their
original IPO price. I expect this deal will probably close with
little or no opposition, and the company will quietly bow from the
US and attempt to quickly re-list on one of China’s growing number
of boards for private high-growth companies.
Doug Young has lived and worked in China for 20 years, much of
that as a journalist, writing about publicly listed Chinese
companies. He currently lives in Shanghai where, in addition to
his role as editor of Young’s China Business Blog, he teaches
financial journalism at Fudan University, one of China’s top
journalism programs.. He writes daily on his blog, Young´s
China Business Blog, commenting on the latest
developments at Chinese companies listed in the US, China and Hong
Kong. He is also author of a new book about the media in China, The
Line: How The Media Dictates Public Opinion in Modern China.
– Best stock to invest in