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

HONG KONG Wed Oct 2, 2013 3:12am EDT

HONG KONG Oct 2 (Reuters) - A Baidu Inc unit is seeking to raise $125 million by listing in the United States, where strong investor appetite for Chinese Internet stocks is trumping lingering concerns about accounting irregularities from China-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 be the biggest U.S. IPO by a Chinese firm in two years.

In 2011, a series of research reports and accounting irregularities hit U.S.-listed Chinese companies, sparking a wave of delistings and prompting high-level talks between regulators in Washington and Beijing about handing over key documents that continue today.

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

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

The technology-heavy Nasdaq's Composite Index is up 26 percent so far this year, and Chinese firms are particularly in favour with Baidu, the country's largest search engine provider, 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-commerce company, is also looking to take its up to $15 billion IPO to the United States and should Alibaba successfully list there, that will only bolster the case for China's tech industry to seek similar offerings.

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

Several of the Chinese companies that delisted starting in 2011 were those that became public through what's known as a reverse-takeover, a legal public offering process that, however, is open to accounting and transparency abuses. Such listings are a rarity now.

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

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

Qunar's online customers grew to 203.2 million in the year to June 2013, from 187.3 million at the end of 2012. Its net loss narrowed to 16.9 million yuan ($2.76 million), the filings show.

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

LightInTheBox Holding Co, a Beijing-based online retailer, raised $78.9 million in a June IPO on the New York Stock Exchange and its shares have risen 27 percent since the deal.

China's Montage Technology Group Ltd has seen its stock surge 37 percent since its $71 million September IPO on the Nasdaq while China Commercial Credit, a micro-credit lender, has seen its shares rise 46 percent since its Nasdaq debut in August.