iSoftStone: Bring on the Chinese IPO Bubble, Baby
Chinese tech companies’ US IPO have been erupting into a storm of money lately. IT services company iSoftStone, which targets the banking, energy, communications, and tech industries with its consulting and services, is the NYSE’s latest wunderkind. From Reuters:
Shares of China-based IT services provider iSoftStone Holdings Ltd ISS.N rose 36.6 percent in early trading Tuesday in their stock market debut as investors again put their money on the Chinese tech sector. The shares were trading at $17.25 at midmorning on the New York Stock Exchange, up from an initial public offering price of $13. They earlier rose as high as $18.77.
Investors recently have had an insatiable demand for Chinese tech stocks. One new issue last week more than doubled in price in its first day of trading. The outsized demand has caused some observers to worry about a bubble, similar to the U.S. tech boom and bust of the late 1990s and early 2000s.
The company said it would use its share of IPO proceeds to repay bank borrowings and for general purposes. Sellers in the IPO include AsiaVest Opportunities Fund and Infotech Entities.
Is it a bubble? Look at recent Chinese dot-com IPO history, from the New York Times:
Last week, shares of Youku, called the YouTube of China, rose 161 percent in the first day of trading on the New York Stock Exchange. E-commerce China Dangdang, an online retailer heralded as the Chinese Amazon.com, popped 87 percent after its initial public offering the same day. The Internet content provider ChinaCache International Holdings rose 95 percent in the day after its Nasdaq debut in October.
Through these IPOs, Chinese companies get their hands on more capital in US stock markets, and investors bid up a bubble. Everyone’s making money. It’s not a bad thing if you play it right, and don’t assume it will go on forever.
Besides, it’s about time something exciting happens on the stock market.