Wowo will seek $40m in Nas­daq IPO

China Daily (Canada) - - FRONT PAGE - By JACK FREIFELDER in New York jack­freifelder@ chi­nadai­lyusa.com

Wowo Ltd, a Beijing-based e-com­merce firm, is set to be­come the first Chi­nese company to list in the United States in 2015, a move that in­vest­ment ad­vis­ers see as a pre­lude to another strong year of IPOs com­ing out of Asia.

“Wowo is the be­gin­ning and may just be a small sign of some other Chi­nese IPOs com­ing,” said Kath­leen S. Smith, a prin­ci­pal and IPO ETF (ex­change­traded fund) man­ager at Re­nais­sance Cap­i­tal.

“This is not your stan­dard IPO, it’s a best ef­forts of­fer­ing,” Smith told China Daily. “It could have a num­ber of clos­ings and the deal size could change, so it’s a lit­tle harder for an in­vestor to know that there’s go­ing to be a cer­tain amount of liq­uid­ity in that IPO.”

Peter Halesworth, a port­fo­lio man­ager with Heng Ren In­vest­ments, a Bos­ton-based firm that in­vests in Chi­nese com­pa­nies listed in the US, said the Chi­nese e-com­merce space is al­ready quite crowded by Baidu Inc, Alibaba Group Hold­ing Ltd and Ten­cent Hold­ings Ltd (BAT), which could be an is­sue for Wowo go­ing for­ward.

“BAT all have horses in the race, which Wowo or 55tuan. com is try­ing to com­pete in,” Halesworth said. “That is a very stiff chal­lenge. In­vestors are re­ally go­ing to want to do their due dili­gence first and make sure the company’s plan is cred­i­ble. The bur­den of proof will be on Wowo’s man­age­ment.

“The most im­por­tant thing to know is how they are go­ing to ex­e­cute the tran­si­tion from their group buy­ing strat­egy to an e-com­merce plat­form that ba­si­cally pro­vides a mo­bile store end­point to con­sumers,” he said.

A Jan 9 fil­ing with the Se­cu­ri­ties and Ex­change Com­mis­sion said Wowo plans to raise up to $40 mil­lion in an IPO on the Nas­daq Stock Mar­ket in New York.

Founded in 2010, Wowo op­er­ates Chi­nese group-buy­ing site 55tuan.com. The company is China’s largest e-com­merce plat­form for lo­cal life­style ser­vices in China, in­clud­ing movie the­aters and restau­rants.

Wowo uses its multi-pronged plat­form to pro­mote “di­rect in­ter­ac­tion” be­tween more than 2,000 lo­cal mer­chants and their tar­get cus­tomers in nearly 150 ma­jor Chi­nese ci­ties, ac­cord­ing to its fil­ing. The company had net rev­enues of $36.3 mil­lion for the 12-month pe­riod that ended Dec 31, 2013.

In ad­di­tion to its e-com­merce web­site, the firm also sup­ports in­fra­struc­ture for real-time, lo­ca­tion-based in­ter­ac­tion through mo­bile de­vices. As of Sept 30, the company had 17.3 mil­lion ac­tive mo­bile users on Wowo Mo­bile, company data showed.

Wowo at­tempted an IPO in the US in 2011, but had to with­draw be­cause of in­ter­nal de­lays.

Josef Schus­ter, founder of Ipox Schus­ter LLC, a Chicagob­ased in­de­pen­dent fi­nan­cialser­vices firm spe­cial­iz­ing in global IPOs, said Wowo’s decision to list in the US could be a play to curry fa­vor among in­vestors who are still high on the “pos­i­tive sen­ti­ment” sur­round­ing the Alibaba IPO.

“Given that there is

not another Alibaba com­ing by size, the gross pro­ceeds are go­ing to be down from 2014,” Schus­ter said. “The theme of the year for China-linked IPOs is go­ing to be small- and mid-cap com­pa­nies go­ing pub­lic, ba­si­cally a con­tin­u­a­tion of the trend that we have seen in 2014, just many less of the large ones.

“The IPO should be suc­cess­ful de­spite the mar­ket tur­bu­lence here in the US,” he said. “It’s ac­tive in the e-com­merce business, and in­vestors have re­al­ized that mi­cro- and small­cap IPOs have ac­tu­ally out­per­formed other larger deals quite sub­stan­tially over the last two to three years.”

Halesworth said a “promis­ing” as­pect for Wowo is the re­newed in­ter­est among US in­vestors for Chi­nese com­pa­nies.

“We’re see­ing the ap­petite rein­vig­o­rated,” he said.

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