Shares in China.com, the first Hong Kong-based internet stock to be listed on the Nasdaq market, more than tripled in value on the first day of trading in New York following a massive oversubscription to the IPO. Investors were apparently attracted by China.com’s solid presence in the potentially-huge Chinese market and the fact one of its major shareholders is the official government news agency, Xinhua. Even a warning in the prospectus that the company may be held liable for publishing information that violates China’s censorship laws, and could be blocked or even shut down by the Chinese authorities did not put people off. The initial offer of 4.2 million shares at $20 each raised $84m. But by the end of trading on Tuesday the shares stood at $66.6 valuing the company at more than $1.4bn despite it having reported a loss of $8.5m last year on revenue of $3.5m.
The company provides both Chinese and English-language web portals for China, Hong Kong and Taiwan and claims to have more than 350,000 registered users. Its biggest single shareholder is Hong Kong developer New World Infrastructure with 18% after the listing, and others include Xinhua with about 11%, America Online with 8% and 24/7 Media Inc, also with about 8%. The prospectus said the company could be making a profit by 2001 and predicted sales of just $7m for this year. Andrew Look, a fund manager at Prudential Portfolio Managers Asia Ltd, said: People are willing to pay a lot of money for potential. They won’t see much in the way of earnings in the short to medium term.
