BEIJING—A Chinese e-commerce services firm backed by
Alibaba Group raised a lower-than-expected $110 million in a New
York initial public offering on Thursday, in a potential sign of
skepticism from U.S. investors about Chinese Internet stocks.
The offering marks only the second in the U.S. by a Chinese
company this year after last year's boom, which included Alibaba
Group Holding Ltd.'s blockbuster $25 billion offering. Bankers said
the slowdown reflects the rising amount of private-funding
alternatives available to Chinese startups.
Shanghai-based Baozun Inc. wants to raise money to fuel efforts
to ride what it expects will be a surge in Chinese demand for
branded goods online. The firm helps international brands such as
Philips NV, Nike Inc. and Microsoft Corp. develop websites and
digital marketing for their storefronts on shopping platforms such
as Alibaba's Tmall and rival JD.com Inc., as well as their own
online stores. It also handles customer service, logistics and
warehousing. It says it has a 20% share of its market by
transaction value.
Baozun Chief Executive Officer Vincent Qiu said the deal was
well received by investors during the roadshow and that the stock's
pricing was arrived at to better benefit investors. "We plan to be
around for a long, long time, and we think if we keep executing our
strategy in such a rapidly growing market, the share price will
take care of itself," he said.
The company, founded in 2007, has its sights set on the
burgeoning market of brands selling to Chinese consumers over the
Internet, which is expected to grow from $129 billion last year to
$379 billion in 2017, according to a report by market research firm
iResearch Consulting Group commissioned by Baozun.
Baozun sold 11 million American depositary shares at US$10 each,
lower than its indicative price range of US$12-US$14. Shares
recently were at $10.15, up 1.5% from the offer price in their
Thursday morning debut on the Nasdaq Stock Market.
Baozun's stock pricing could reflect broader worries about the
Chinese economy, said Hunter Williams, an associate partner with
OC&C Strategy Consultants in Shanghai. "There's a lot of
concern about a China slowdown and a crazy stock-market situation.
I suspect that there's a lot of concern that good times are not
going to last."
It could also indicate that investors see it as closely
associated with Alibaba, he said, which has faced challenges in
recent months with concerns about counterfeit goods on its
platforms. Alibaba's stock has fallen 25% from its November peak,
though still trades above its offer price. Alibaba declined to
comment.
Baozun is only the second Chinese Internet company to list in
the U.S. this year, after an April offering by Wowo Ltd., which
operates an online sales platform. This appears to signal a
slowdown from last year, when many Chinese Internet firms launched
U.S. IPOs, including Alibaba, JD.com, social media platform Weibo
Corp., online cosmetics retailer Jumei International Holding Ltd.
and Chinese dating app Momo Inc.
Bankers say that Chinese interest in U.S. listings has waned as
Internet companies find they can get higher valuations in the
private market. Chinese technology startups are seeing record
amounts of cash going into them as hedge funds and wealthy
individuals chase technology-related assets. For example,
smartphone maker Xiaomi Corp. raised more than $1 billion in a
private funding round in December that valued it at over $45
billion.
Still, Baozun decided to list in the U.S. because the bulk of
its clients are international brands and the company thinks it is a
way to raise their profile and attract institutional investors, Mr.
Qiu said. "We are about to be more visible to potential brands here
(in the U.S.), we are quite excited about it."
Baozun reported a net loss of $9.6 million on total revenue of
$255 million last year, largely due to stock awards to employees.
The company made $1.2 million in first-quarter profit, roughly
double the amount in the year-earlier period, according to the
prospectus.
But revenue growth had also slowed last year, which Mr. Qiu said
was because Baozun stopped working for low-margin personal computer
brands from which it was difficult to generate profits.
Morgan Stanley, Credit Suisse and Bank of America Merrill Lynch
are underwriting the IPO, according to the company's regulatory
filings. Alibaba is the company's largest shareholder, with a 23.5%
stake held by its subsidiary Alibaba Investment Ltd. before the
offering.
Write to Gillian Wong at gillian.wong@wsj.com and Prudence Ho at
prudence.ho@wsj.com
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