Xunlei calls off US IPO once again

Updated: 2011-07-22 11:10

By Zhang Yuwei (China Daily)

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NEW YORK - Shenzhen-based Xunlei Ltd, a Chinese online video site partly owned by Google, announced it will indefinitely postpone its initial public offering (IPO) scheduled on the Nasdaq for Thursday.

The company said in a statement that the decision was "due to stock market conditions" and it didn't give any new date for the IPO. The pullback comes during a week when stocks are surging, with the Dow Jones Industrial Average having its best day this year on Tuesday, rising more than 200 points. It is the second time the company decided to postpone the IPO.

On Wednesday, real estate website Zillow saw its shares soar 79 percent in its Nasdaq debut. Zillow was one of 18 IPOs slated for July, an unusually high figure.

One analyst didn't think Xunlei's decision was motivated by either stock or IPO market conditions. "It makes sense for Xunlei to postpone their IPO because it is doubtful they would have received a warm welcome," said Shaun Rein, founder and managing director of the China Market Research Group, a strategic market intelligence firm in Shanghai.

Rein added it is "a terrible time" for Chinese companies to list on the US stock market after a number of accounting scandals have damaged the credibility of US-listed Chinese companies.

Xunlei, which booked $47 million in sales over the last 12 months, planned to list on the Nasdaq under the symbol XNET and has JPMorgan and Deutsche Securities as the lead underwriters on the deal.

Xunlei hoped to raise $114 million by offering 7.6 million American Depositary Shares (ADS) in a price range between $14 and $16.

Xunlei's co-founder, Sean Shenglong Zou is the company's biggest shareholder with a 27.5 percent stake, while Google owns 2.8 percent.

The company, founded in 2003, provides digital media content downloading and online video streaming and is the third largest site in China, with more than 120 million monthly unique visits.

Xunlei's board of directors include Kai-Fu Lee, CEO of Innovation Works and former vice-president at Google and then-president of Google Greater China.

Short sellers such as Muddy Waters Research have accused Chinese companies such as US-listed Sino-Forest, the Hong Kong-based operator of tree plantations, and Spreadtrum, the Shanghai-based chip designer, of fraud, although both companies' shares have rebounded from their lows in recent weeks.

Last week, rating agency Moody's Investor Service raised warnings about accounting and corporate governance risks at more than 40 China-based companies. "Sentiment is against Chinese Internet stocks right now. Aside from fears about reverse mergers, there are fears of volatility," Rein said.

Thomas Ho, an expert in risk management and financial modeling in New York, said corporate governance in China historically is different than in the US.

"(So) there is no surprise that these (accounting scandals) happen. It takes time before the Chinese and the Western systems converge in attitudes and culture," Ho said.

"Chinese companies should follow the local standards, not the home standard, including marketing in addition to the legal framework," he added.

China Daily


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