Q3 Sees Dual Decrease of IPO Events & Offer Amounts, Offer Amount by VC/PE- backed...

Q3 Sees Dual Decrease of IPO Events & Offer Amounts, Offer Amount by VC/PE-
backed IPOs Slump by 95% Y-o-Y, & Exits at Home and Abroad Become Harder

BEIJING, Oct. 23 /Xinhua-PRNewswire/ -- The Zero2IPO Research Center --
the research arm of Zero2IPO Group -- recently released the "China Enterprises
IPO Report Q3 2008" report. According to the report, domestic and overseas IPO
activities have slowed down in Q3, featured by a notable decrease in both the
number of listed companies and the amount of raised capital. The financial
crisis is still looming over the capital market. Due to the sluggish market
environment, VC/PE investors are confronted with the most difficult moment in
recent years. This quarter, only a small portion of VC/PE investors succeeded
in exiting investments. Worse still, IPO exit deals in Q3'08 were the lowest
in number among the third quarters of 2006-2008.
Twenty-eight Chinese companies achieved IPO status during Q3 2008, raising
a total of US$3.06B on domestic and overseas markets. On the yearly basis,
both the number of IPO events and offer amount were the lowest for the recent
three years. The average offer amount was only US$109.10M. Compared to Q3'07,
the IPO events decreased 62.2%, while the offer amount and average amount
decreased by 86.1% and 63.2% respectively.
By market, 10 companies successfully got listed overseas, raising a total
of US$1.06B. However, the overseas offer amount and number of IPO events
decreased by 70.6% and 85.9% year-over-year respectively. Although the
domestic markets outstripped their overseas counterparts by attracting 18
enterprises with US$1.99B raised in Q3, the offer amount dropped 86.1% and IPO
events decreased by 55.0%, respectively, over the same period of 2007.
VC/PE funds backed 10 of the 28 debuts. The 10 listings backed by VC or PE
raised US$716M in total, including US$417M raised by four overseas listings
and US$299M raised by six domestic listings. VC/PE-backed Chinese IPO events
decreased by 19 and the offer amount decreased by 94.8% compared with those
during the same quarter one year ago.
Table 1: IPO Events and Offer Amount by Market

Market Offer Amt. IPO Events Average
(US$M) (US$M)
Domestic 1,993.59 18 110.76
Overseas 1,061.17 10 106.12
Total 3,054.77 28 109.10

Source: Zero2IPO Research Center

Figure 1 Year-on-Year Comparison of IPO Events and Offer Amt.
(Please Click the Link in the bottom of the release)

Sluggish Overseas IPO Events and Offer Amount Fall into Decline
As the sub-prime loan crisis in the U.S. has spread and evolved into a
global financial crisis during the third quarter of 2008, major indices on the
overseas stock markets have continued to plummet, giving a heavy blow to the
confidence of investors. With the recessive global economic recession, the
overseas IPO number of Chinese enterprises has further reduced to an
aggravated extent, demonstrated by the drop in listing number and offer
amount.
These figures have bottomed out in nearly past three years. During this
quarter only ten China enterprises achieved IPO status on overseas markets,
offering US$1.06B in total. The number of IPO events decreased by 24 compared
to Q3'07 and by 2 in comparison to Q3'06. The offer amount dropped by 85.9% in
relation to Q3'07 and by 77.4% in comparison to Q3'06.
Figure 2: Year-on-Year Overseas IPO Events and Offer Amount
(Please Click the Link in the bottom of the release)
The ten overseas IPOs were floated on HKMB (4), NYSE (3), SGX (2), and
NASDAQ (1). Notably, China-concept new listings in Q3 account for over half of
the total new listings on HKMB, SGX, and NYSE. In terms of industry
distribution, most overseas China enterprises IPOs were spread amongst the
Traditional sector. Other listings were distributed amongst the Services and
Broad IT sectors.
Table 2: Overseas IPO Events and Offer Amt. by Market

Market Offer Amt. Percent IPO Percent Average
(US$M) Events (US$M)
HKMB 876.66 82.6% 4 40.0% 219.16
NYSE 110.30 10.4% 2 20.0% 55.15
SGX 65.82 6.2% 3 30.0% 21.94
NASDAQ 8.40 0.8% 1 10.0% 8.40
Total 1,061.17 100.00% 10 100.0% 106.12

Source: Zero2IPO Research Center

Table 3: Overseas IPO Events and Offer Amt. by Industry

Sector Offer Amt. Percent IPO Percent Average
(Grade 1) (US$M) Events (US$M)
Traditional 890.14 83.9% 6 60.0% 148.36
Services 101.38 9.6% 2 20.0% 50.69
Broad IT 69.65 6.6% 2 20.0% 34.83
Total 1,061.17 100.0% 10 100.0% 106.12

Source: Zero2IPO Research Center

Domestic listing has remarkably slowed down; many approved enterprises are
still looking forward to a brighter future
The third quarter of 2008 has witnessed the low-level readjustment of
large-cap stocks on Shanghai and Shenzhen Stock Exchanges, and stock indices
have undergone an all-time low. As uncertainties spread against the background
of an invasive overseas financial storm, China Securities Regulatory
Commission has exercised a stringent control on IPO quota in order to maintain
the stability of domestic capital market. A lot of new stocks have been
authorized for IPO and are still awaiting a brighter future. The initial
public offering has considerably slowed down.
In this investment environment, this quarter saw only 18 domestic listings
raise US$1.99B. Both IPO events and offer amount dramatically decreased from
the same periods of 2007 and 2006. The number of domestic IPO events decreased
by 22 versus Q3'07 and by 3 versus Q3'06. The offer amount decreased by 86.1%
and 67.5% from Q3'07 and Q3'06, respectively. By ownership, all the 18
enterprises except Shanghai bourse-listed China South Locomotive & Rolling
Stock Corporation Limited are privately owned. These 17 privately owned
enterprises collectively raised US$1.03B with an average of US$60.86M.
Notably, domestic markets slightly outperformed overseas markets both in
respect to number of IPO events and total offer amount: 8 more listed
companies and US$932M more offer amount.
Figure 3: Year-on-Year Overseas IPO Events and Offer Amount
(Please Click the Link in the bottom of the release)

Table 4: Domestic IPO Events and Offer Amt. by Market

Market Offer Amt. Percent IPO Percent Average
(US$M) Events (US$M)
Shenzhen
SME Board 1,034.65 51.9% 17 94.4% 60.86
Shanghai
Stock Exchange 958.94 48.1% 1 5.6% 958.94
Total 1,993.59 100.0% 18 100.0% 110.76

Source: Zero2IPO Research Center

In terms of industry distribution, Traditional sector continued to hold
the dominant position. Thirteen out of the 18 listed companies originate from
Traditional industry, representing 72.2% of the total listings. Apart from
Traditional, Broad IT, Services and Bio/healthcare sectors saw debuts in Q3.
Table 5: Domestic IPO Events and Offer Amt. by Industry

Sector Offer Amt. Percent IPO Percent Average
(Grade 1) (US$M) Events (US$M)
Traditional 1,808.73 90.7% 13 72.2% 139.13
Broad IT 112.72 5.7% 3 16.7% 37.57
Services 47.16 2.4% 1 5.6% 47.16
Bio/healthcare 24.99 1.3% 1 5.6% 24.99
Total 1,993.59 100.0% 18 100.0% 110.76

Source: Zero2IPO Research Center

VC/PE Hard to Attain Exit Owing to the Turmoil in Overseas and Domestic
Markets
The third quarter of 2008 has also witnessed the aggravation of the sub-
prime loan crisis which has triggered a global financial crisis and a
fluctuating period of overseas capital market. Chinese enterprises which
intend to conduct an overseas IPO are forced to accept the increasingly
aggravated market situation as well as restrictive regulations specified by
the No.10 Document. In view of the domestic market, although Shenzhen Stock
Exchange and Shanghai Stock Exchange have revised Regulations on Stock
Offerings to shorten VC/PE lock-up period, the benefits are not so effective
to fight against the aggravated climate. Initial public offerings of new
stocks have slowed down and many enterprises have not yet been qualified for
IPO, making it more difficult for VC/PE investment exit. This quarter saw ten
VC/PE-backed overseas and domestic debuts offer US$716.44M in total. The
number of IPO events decreased by 19 and the offer amount decreased by 94.8%
in comparison to the same period last year, indicating the substantial
decrease of VC/PE exit activeness. On the domestic markets, six VC/PE-backed
debuts raised US$299.37M, accounting for 60.0% of the total IPO events and
41.8% of the total offer amount. Meanwhile, four VC/PE-backed overseas
listings raised US$417.07M, representing 40.0% of the total IPO events and
58.2% of the total offer amount.
Table 6: VC/PE-backed IPO Events and Offer Amt.

Market Offer Amt. IPO Average
(US$M) Events (US$M)
Domestic 299.37 6 49.89
Overseas 417.07 4 104.27
Total 716.44 10 71.64

Source: Zero2IPO Research Center

Note: Since the first quarter of 2008, China Enterprises IPO Reports
published by Zero2IPO Research Center have extended the research scope of
overseas markets to 11 stock exchange markets, i.e. NASDAQ, NYSE, AIM, HKMB,
HKGEM, SGX, CATALIST, TSE, MOTHERS, KOSDAQ, and FSE.
For more information please click:
http://www.zero2ipo.com.hk/china_this_week/detail.asp?id=7533

About Zero2IPO Research Center
Founded in November 2001, the Zero2IPO Research Center provides a full
range of business research reports and customized research solutions for
investment professionals in the Greater China Region. Our research ranges from
Venture Capital, Private Equity, IPO, M&A to TMT industries. The Zero2IPO
Research Center sets itself apart from competitors as the most prestigious
research institute in the Chinese VC and PE spheres.
SOURCE Zero2IPO

Ms. Robin Zhu, Zero2IPO, +86-10-8458-0476, Robinzhu@zero2ipo.com.cn, or Nicole
Meng, Suite 1203, Tower A, Eagle Plaza, No. 26, Xiaoyun Road, Chaoyang
District, Beijing, 100125, China, nicolemeng@zero2ipo.com.cn