Tarena fizzles in its IPO

The US market for initial public offerings from China continues to show new life. How hot the market will get amid an expected deluge of Chinese technology-related IPOs this spring remains open to question.

In its first two days of trading on the Nasdaq Stock Market, Tarena International, a Beijing-based provider of professional information-technology education services in China, and the first significant Chinese listing so far in 2014, closed just above its offering price.

Tarena sold 15.3 million American depositary shares at $9 each, or $137.7 million. Shares, under the symbol TEDU, rose as much as 20 percent after trading began on April 3 but closed at $9.06 that day and $9.04 the next day.

Some observers saw the IPO as a slightly misguided effort to benefit from investor enthusiasm for Chinese IPOs whipped up by news of planned IPOs from big Internet companies such as Alibaba Group Holding, JD.com and Sina Weibo.

"I do think Tarena's disappointing performance is mostly an aberration, and the company probably accelerated its IPO plan to try and steal some of the hype surrounding the Internet listings," Doug Young, a financial journalism professor at Fudan University in Shanghai, wrote in his China business blog.

"I would look for the company's shares to post some modest gains in the next few months, but nothing like the gains we've seen for some of the web firms that listed late last year," Young wrote. "In the meantime, other tech listings should continue to post strong debuts for at least the next 4 to 6 weeks, after which we could start to see enthusiasm start to fade."

As a "niche provider of education services for software engineers", Tarena is an anomaly compared with the vast majority of Chinese companies rushing to list in New York, most of which are in the Internet space, Young wrote.

Tarena is considered a leader in an expanding field. Between 2010 and 2013, the company's target market grew to $11.1 billion from $8.1 billion, representing a compound annual growth rate of 11.4 percent.

In its prospectus, the company said it holds a leading 8.3 percent share of the China market for professional IT education services, citing data provided by research firm IDC.

The average starting salary of 2012-enrolled students was "14.3 percent higher than the national average of college graduates in 2012," the prospectus said, citing IDC data.

Tarena's disappointing performance is easier to criticize today than it would have been a year ago, when US-listed Chinese stocks were struggling amid a chilly climate for Chinese cross-border listings in the US, according to Young's blog. "A year ago that kind of performance would have been positive, since any gains at that time were a relief," Young wrote.

The US market affords Chinese companies options not available in Hong Kong, such as dual-class structures and the ability to list without having turned a profit. It also offers more liquidity than the Chinese mainland's IPO market.

michaelbarris@chinadailyusa.com

(China Daily USA 04/07/2014 page2)