November 21, 2012 / 4:05 PM / 5 years ago

UPDATE 2-Shares of China's YY rise up to 12 pct in Nasdaq debut

* YY first Chinese company to list in U.S. since March

* Transparency, growth concerns hindered enthusiasm for market

* China firms increasingly go private as public valuations fall (Adds comments by CFO, updates stock price)

By Olivia Oran

Nov 21 (Reuters) - YY Inc shares rose as much as 12 percent in their Nasdaq debut on Wednesday, as the social media platform sought to revive a U.S. IPO market for Chinese companies after an eight-month lull.

Shares climbed to $11.75 after opening at $10.50. Around midday, the stock was up 8.4 percent at $11.38.

A spate of Chinese companies hit U.S. exchanges in 2010, but the market for these offerings largely dried up as China faced questions about growth, corporate governance and transparency.

Scandals at Chinese companies including Sino-Forest Corp and Longtop Financial Technologies also spooked investors.

YY’s sale of 7.8 million American depository shares raised $81.9 million. The company had intended to price shares in a range of $10.50 to $12.50.

YY offers online games, karaoke, music-concert and educational services through its platform to more than 400 million Internet subscribers. Investors include Walt Disney Co venture arm Steamboat Ventures and hedge fund Tiger Global Management.

YY’s net sales more than doubled to 319 million yuan ($50.8 million) for fiscal-year 2011. The company posted a profit of 20.8 million yuan ($3.3 million) for the six months ended June 30.

The last U.S. initial public offering of a Chinese company was Vipshop Holdings Ltd’s in March. Shares of the online flash sales site have nearly doubled since their debut, after an early stumble. Shares of Vipshop, which priced at $6.50, were down 0.5 percent at $12.40 at midday on Wednesday.

In May, car-rental provider China Auto Rental Holdings pulled its $138 million offering after poor investor demand.

A slew of publicly traded Chinese companies have also decided to go private as their shares fell on U.S. exchanges.

But the tide may be turning for Chinese companies, said Thomas Rice, a partner at law firm Baker & McKenzie LLP in New York who has worked with Chinese companies.

“The leadership in China is probably getting tired about hearing about these problems, and the Chinese take the prestige of listing in the United States very seriously,” he said. “It will never be perfect, but I think companies and underwriters are more seriously vetting who they let consider listing here.”

A successful listing for YY could also open the door for other Chinese companies looking to list in the United States. A number of Chinese Internet firms are weighing listing here including online travel site Qunar, online retailer and online shopping site LightInTheBox,, sources previously told Reuters.

“There are a lot of good Chinese companies looking at us as a harbinger to see if we can become an ice-breaker to be listed in the U.S. markets,” YY’s chief financial officer, Eric Ho, said in an interview.

YY’s IPO is being underwritten by Morgan Stanley, Deutsche Bank AG, Citigroup, Pacific Crest Securities and Piper Jaffray.

YY will use proceeds to invest in technology and infrastructure, product development and sales and marketing as well as for other general corporate purposes. ($1 = 6.2339 Chinese yuan) (Editing by Gerald E. McCormick, David Gregorio and Matthew Lewis)

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