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David Friend’s business is built around preparing for the worst-case scenario. Perhaps that’s why his company, Carbonite, was still willing to go public during an especially volatile week for stocks. Mr. Friend talks about Carbonite and its market debut.
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Prada, the Italian luxury fashion house, lowered the price guidance for its listing in Hong Kong amid feeble demand from retail investors, a person with direct knowledge of the matter said Thursday.
And shares in Samsonite, the luggage maker that was founded in the United States 101 years ago, fell sharply on their first trading day in Hong Kong, becoming the latest in a string of global offerings to see a poor market debut.
Meanwhile, widespread selling across the Asia-Pacific region sent several key stock indexes down by more than 1.5 percent.
The global market sell-off had started on Wednesday, as protests and an imminent cabinet reshuffle in Athens once again fueled fears that Greece’s debt crisis would escalate and spread. On Wall Street, the Dow Jones industrial average fell 1.5 percent on Wednesday.
Asian markets followed suit on Thursday, with a 1.9 percent drop in Australia and South Korea. The Hang Seng in Hong Kong declined 1.8 percent.
The Nikkei 225 in Japan sagged 1.7 percent, the Taiex in Taiwan dropped 2 percent and stocks in mainland China fell 1.5 percent.
“There has been a complete loss of confidence,” said Francis Lun, managing director at Lyncean Holdings in Hong Kong. “With Greece on the verge of default, there are now fears that there will be a wider financial crisis.”
Greece’s woes and worries about the momentum of the global recovery have been weighing on financial markets for months.
In many of the fast-growing emerging nations, inflation pressures and rising interest rates are adding to investor nervousness. On Thursday, India raised its key interest rate for the 10th time since early last year.
Likewise, the authorities in mainland China have been reining in bank lending for the past 18 months, as well as raising interest rates. Another rate increase is widely expected to come within weeks as Beijing continues its battle to contain inflation.
“Liquidity is being squeezed by the government’s determination to bring down property prices and tighten rates,” Mr. Lun said.
Stock markets in the Asia-Pacific have performed poorly this year as a result. Most key indexes in the region are now below where they began the year, and several stock market debuts have performed poorly. Some companies have even shelved their public offerings as a result.
The weak market sentiment on Thursday prompted Prada, whose high-end handbags and apparel are popular with Asia’s increasingly affluent shoppers, to lower its price range to between 39.50 and 42.25 dollars, from a previously announced range of 36.50 to 48 dollars, according to a person with direct knowledge of the listing, who spoke anonymously because the information was not yet public.
A price at the upper end of the lowered range would bring Prada $2.3 billion, from the previous maximum of $2.6 billion. Prada is due to price its shares on Friday and start listing on the Hong Kong exchange on June 24.
Meanwhile, shares in Samsonite, which had been only moderately oversubscribed, dropped as much as 10.6 percent early in the day. Although they clawed back some of those losses later on, the shares were well below the issue price of 14.5 Hong Kong dollars, or $1.86, by late afternoon, closing at 13.38 dollars, down 7.7 percent.
Samsonite, which was bought by the British private equity firm CVC Capital Partners in 2007, had previously been forced to price its shares at the lower end of its indicative range, bringing it proceeds of $1.25 billion, rather than the maximum $1.5 billion it had hoped for.
Still, the decisions by companies like Samsonite and Prada to seek a listing in the Asian financial hub, rather than on an exchange closer to home, reflect an the overall shift in the center of economic and financial gravity toward fast-growing countries in Asia.
About a dozen non-Asian companies are aiming to list in Hong Kong this year in a bid to tap a cash-rich investor base and to raise their visibility in what is a key market for their goods.
“We feel at home here,” said Tim Parker, the Samsonite chief executive, amid a clatter of camera shutters at a listing ceremony at the Hong Kong stock exchange on Thursday, adding that the company planned to build its business in China, India and other parts of Asia.
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Ramin Talaie/Bloomberg NewsPandora Media’s chief executive, Joseph Kennedy, left, and its founder, Tim Westergren, on hand at the New York Stock Exchange on Wednesday for their company’s market debut.
8:31 p.m. | Updated
Sobriety has returned to the market for new Internet companies — at least for one day.
Shares of Pandora Media, a popular but unprofitable online music service, made their New York Stock Exchange debut on Wednesday, ending the day up 8.9 percent, at $17.42, after rising as high as $26.
It was a solid performance — all the more so because it came on a day of a broad slump in the overall stock market. Yet the Pandora initial public offering paled in comparison to recent incandescent Internet I.P.O.’s.
Last month, shares of LinkedIn, the social network for professionals, more than doubled on their first day of trading. And just a few days later, Yandex — often described as the Google of Russia — climbed 55 percent on its market debut. Both stocks have since pulled back, but remain well above their offer prices.
In Pandora’s case, “underwriters were better able to match investor demand with the I.P.O. pricing, but probably more likely it demonstrated that some of the euphoria that drove LinkedIn to $100-plus has subsided,” said Paul Bard, vice president for research at Renaissance Capital, an I.P.O. advisory firm. “It shows that there is at least some price discipline in the marketplace and that is a good thing.”
(Morgan Stanley and JPMorgan Chase were among the underwriters for both Pandora and LinkedIn.)
Still, Pandora’s ability to go public at $16 a share — roughly double its initial target range of $7 to $9 — reflects a robust demand for Internet stocks, particularly those with a large base of users. Pandora is not yet profitable, like many of its peers, but the company has more than 90 million subscribers and is adding a new user about every second.
Demand for Pandora’s initial public offering was also amplified because of limited supply. There is not a flood of Internet companies rushing to market as there was more than a decade ago during the dot-com boom. And those that are going public, are showing restraint. Both Pandora and LinkedIn offered less than 10 percent of their total shares.
The investor exuberance for new Internet companies troubles some analysts, who say that the multibillion-dollar valuations do not match the fundamentals of the businesses. That concern could swell in the coming months, as some of the most talked about private Internet companies — Facebook, Groupon and Zynga — take steps toward making market debuts. All three are expected to go public within the next 12 months.
Groupon, which was valued at roughly $1.4 billion last year, may seek a valuation of $30 billion with its I.P.O., according to two people close to the company who were not authorized to speak. The social shopping site posted a loss of $456 million last year on revenue of $713 million.
Pandora, which has never posted an annual profit, recorded a loss of $1.8 million in 2010.
“Pandora is a company where the advertising business is still at a very early stage,” said Richard Greenfield, an analyst at BTIG Research. “This is a two-plus billion dollar valuation, for a company that isn’t making any money yet.”
For Pandora, popularity is something of a double-edged sword. It pays significant royalties to record labels to stream songs, and as users spend more time on the service, the fees mount.
“As the volume of music we stream to listeners increases, our content acquisition expense will also increase, regardless of whether we are able to generate more revenue,” the company warned in its latest securities filing.
According to analysts, Pandora will continue to struggle with profitability until it significantly increases the number of ads it serves and improves the way those ads are focused. Success in that area, however, could alienate some of its users, who use Pandora because of its lack of ads.
And there are competitors. Several technology giants, including Google, Amazon.com and Apple, have recently expanded their digital music services. Upstarts like Spotify, a streaming music service that is popular in Europe, also threaten Pandora’s market share.
Despite the hurdles ahead, Pandora said it still has an enormous opportunity to grow market share. Joseph Kennedy, the company’s chief executive, said that Pandora had room to expand because it has only about 3 percent of the domestic, radio-listening market.
“We’re really focused on just improving the experience we provide to our listeners everyday and giving them that opportunity to listen to Pandora everywhere they’re demanding to listen to it, in the car, in the home, those are the great near-term opportunities,” he said.
The company sold 14.7 million shares on Tuesday evening, raising $234.9 million. Its lead underwriters, Morgan Stanley, JPMorgan Chase and Citigroup, also have the option to sell an additional 2.2 million shares. At Wednesday’s closing stock price, the company is valued at about $2.78 billion.
Mr. Kennedy wanted to look beyond the I.P.O. in an interview on Wednesday. “Many years from now, we’ll look back on this as just one step in the process of building a lasting great company,” he said. “We don’t pay attention to the market, we’re focused on the opportunity.”
In the video below, Evelyn M. Rusli talks with Joseph Kennedy, Pandora Media’s chief executive, about the company’s I.P.O.
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Ym Yik/European Pressphoto AgencyPansy Ho, the chairwoman of MGM China, is the daughter of the gaming tycoon Stanley Ho.
A joint venture between MGM Resorts International and the daughter of a Hong Kong casino mogul raised $1.5 billion on Friday in its initial public offering, highlighting the strong appetite for stocks that have a large exposure to China.
MGM China, whose main asset is a giant hotel and casino in the Chinese gambling hub of Macao, said in a statement Friday that it had priced its shares in the offering at 15.34 Hong Kong dollars ($1.97) — at the top of a previously announced price range.
With total proceeds of $1.5 billion, MGM China’s market debut in June will be one of the largest in Hong Kong so far this year.
It takes total issuance volumes on the city’s stock exchange since Jan. 1 to $18.9 billion — 215 percent more than the total raised during the same period last year, according to Dealogic — underscoring the rapid growth the Hong Kong stock exchange has enjoyed in recent years.
Hong Kong was the No. 1 market for I.P.O.’s in 2010: volumes last year topped $52 billion, according to Thomson Reuters, easily outperforming the New York Stock Exchange’s total of $35 billion.
Most of this activity has been Chinese companies listing in the city. However, Hong Kong is increasingly becoming a destination for non-Asian companies.
Among others rushing to list in the city in coming weeks are the suitcase maker Samsonite, which is owned by the private equity firm CVC Capital Partners. Samsonite is due to start its road show next week, according to a person with direct knowledge of the situation.
Prada, the Italian luxury fashion house, is also lining up a listing in June. Analysts have said the I.P.O. could raise about $2 billion. The road show for the listing is expected to kick off June 6, a person with knowledge of the planned transaction has said.
The people describing the Samsonite and Prada deals spoke on condition of anonymity because the details were not yet public.
And Resourcehouse, a mining company owned by the Australian billionaire Clive Palmer, said in a statement on Friday that it would issue the prospectus for its planned market debut in Hong Kong ‘‘on or around’’ Monday, with a trading start expected on June 10.
Shares in MGM China, meanwhile, are expected to start trading on the Hong Kong exchange on June 3, according to the company’s statement. Pansy Ho, daughter of the longtime casino mogul Stanley Ho, is lowering her existing 50 percent stake in the company as part of the transaction. The proceeds from the sale will make her one of the richest people in China.
Gambling revenues in Macao, a former Portuguese colony about an hour’s ferry ride from Hong Kong, have soared in recent years, and now dwarf those of Las Vegas.
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12:04 p.m. | Updated
Shares of LinkedIn, a professional social network, soared on their market debut on Thursday, feeding a growing investor mania for the latest generation of Internet companies.
The shares opened at $83 and rose as high as $122.70 in late morning trading — well more than double its offering price — on the New York Stock Exchange.
“It’s an exciting day,” Jeff Weiner, LinkedIn’s chief executive said in a phone interview on Thursday morning. “We were able to find investors who understood our story and understood our desire to invest in our platform.”
At more than $80 a share, the company’s valuation is roughly $8 billion, an astonishing figure for a company that was recently valued at about $2.5 billion in the secondary markets.
It is the biggest Internet I.P.O. since Google’s in 2004, and it is a positive sign for the other Internet companies hoping to go public in the next 12 months.
Although LinkedIn is the largest professional online network, the site attracted relatively modest attention before its offering, compared with its high-flying peers, Facebook and Groupon. Facebook, which is widely expected to go public next year, has soared on the secondary markets, with shares trading at an implied valuation as high as $80 billion in recent months.
The valuation of LinkedIn — the first of the big American social media companies to go public — has been surging. In the first week of May, LinkedIn set the target range for its offering at $32 to $35 a share, which valued the company at about $3 billion. Then the company raised the bar 30 percent on Tuesday, to a range of $42 to $45 a share.
Late on Wednesday, the company priced its I.P.O. at $45 a share, at the top end of its forecast. LinkedIn has raised $352.8 million in its offering, but it may raise up to $405 million, if its underwriters decide to sell an additional 1.1 million shares.
As investor enthusiasm soars, analysts are wondering if the valuations for stocks like LinkedIn are grounded in reality.
“Eyebrows are raised around this valuation,” Benjamin Schachter, an analyst with Macquarie Capital, said. “People are trying to figure out how do we value the companies that are coming online?”
According to data from the financial research firm Trefis, the underlying fundamentals do not justify LinkedIn’s rocketing valuation. Based on their analysis of its primary revenue streams — recruiting services, display advertising and subscriptions — the site is worth about $3.2 billion.
“It will be interesting to see how it trades over the next month,” said Cem Ozkaynak, a co-founder of Trefis. “Even though its a professional network, a lot of its business is dependent on growing the number of business clients.”
According to the Trefis report, LinkedIn’s current revenue growth rate will have to pick up substantially in the next five years to justify a valuation north of $4 billion. LinkedIn, which has about 100 million members, has struggled to increase user engagement on its site, an important metric for attracting and retaining recruiters. It is also facing competitive pressure from established job-listing sites like Monster and Careerbuilder, Mr. Ozkaynak said.
“LinkedIn will have to maintain the significant fees it charges to corporate and business customers, while growing its corporate and business customer base significantly from a few thousand customers today to tens of thousands over the next few years,” he wrote in the report.
The site made $243.1 million in 2010, with net income of $15.4 million.
Bank of America Merrill Lynch, JPMorgan Chase and Morgan Stanley led the underwriting of the LinkedIn offering.
Article source: http://dealbook.nytimes.com/2011/05/19/linkedin-soars-in-i-p-o/?partner=rss&emc=rss
LinkedIn, which is set for an initial public offering on Thursday, could raise more than $405 million, up from an estimate of $315 million earlier this month, according to a regulatory filing on Tuesday.
As investor demand for social media companies has surged, LinkedIn, whose networking site for professionals has more than 100 million members in over 200 counties, said it planned to sell more than 7.84 million shares at $42 to $45 apiece. The underwriters have the option to sell additional 1,176,000 shares, depending on the appetite for the offering.
Its current pricing plans represent an increase of more than 30 percent from previous expectations. In early May, the company said in a regulatory filing shares at $32 to $35.
LinkedIn is the latest Internet company rushing to go public, amid strong investor interest and improved market conditions. Social networking sites are among the most sought after offerings, and LinkedIn will be one of the first major players in the United States to go public this year. At the top end of the price range, the company is now valued at about $4.3 billion, up from more than $3 billion based on earlier pricing.
Other big names in the space are expected to follow suit, with Groupon, the social shopping site, said to be considering an initial offering later this year. Facebook, by far the largest social networking site, could make its market debut in 2012.
An initial offering allows entrepreneurs and institutional investors a chance to cash out. LinkedIn’s chairman, Reid Hoffman, who is selling a small number of shares, will net an estimated $5.2 million, assuming the shares price at $45. At that price, his entire stake is worth $852.8 million. Goldman Sachs is to be the largest seller, offering the firm’s entire stake of 871,840 shares.
But it remains to be seen how well the stock will perform in the public markets. The Chinese social networking site Renren priced its offering on the New York Stock Exchange at $14.
While its shares closed at $18 on the first day of trading on May 4, the stock is currently trading at $12.60.
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Despite the recent turbulence in financial markets, plans for two high-profile stock market listings are moving forward in Hong Kong.
Glencore International, a commodities trader based in Switzerland, received approval from the Hong Kong Stock Exchange on Friday for an initial public offering, according to a person with direct knowledge of the situation. Glencore is planning to raise funds in a dual listing in London and Hong Kong, said the person, who spoke on condition of anonymity because he was not authorized to speak publicly about the plans.
Separately, plans for a stock market listing in Hong Kong by Prada, the Italian fashion house, took a step forward this week with the submission of a listing application to the city’s stock exchange. The move puts Prada on track for a market debut around the middle of this year.
Prada had said in January that it intended to carry out an initial public offering in Hong Kong, and the formal application this week signaled that it was confident that the market environment was stable enough — despite the turmoil that has erupted in the Middle East since then and the lingering nuclear crisis in Japan — to press ahead with its plans.
A person with direct knowledge of the matter said Friday that Prada’s application had been submitted on Wednesday, setting in motion a process that could lead to a price range for the shares being determined in June, and a trading start in July. The person declined to be identified because he was not authorized to speak publicly about the matter.
The listing could raise as much as $2 billion, some analysts believe. Prada, which is based in Milan but derives a large part of its sales from Asia, is one of a growing number of non-Asian companies that are choosing to list on Asian stock exchanges.
Half a dozen such I.P.O.’s took place in Hong Kong — the main beneficiary of this trend — last year. Bankers in the city say that as many as a dozen could follow this year, including mining companies from Russia, Kazakhstan and Mongolia.
Fitness First, a British gym operator owned by the private equity firm BC Partners, is seeking a market debut in Singapore. Samsonite, maker of upscale suitcases and bags, is considering a listing in Asia, most likely in Hong Kong.
Glencore has not made any formal announcements on its I.P.O. plans but people with knowledge of the matter have said the dual listing could raise as much as $10 billion.
Asian stock exchanges now attract the majority of global I.P.O.’s. Data published by Thomson Reuters on Friday showed that exchanges in the Asia-Pacific region, excluding Japan, accounted for 54 percent of global I.P.O. proceeds during the first quarter of this year.
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