The 48 percent slump in LightInTheBox Holding Co. (LITB:US), the Chinese online discount retailer that sold shares in the U.S. this year, risks reducing the price for the nation’s companies seeking to go public, IPOX Schuster LLC said.
American depositary receipts of LightInTheBox plunged below their June 6 debut level last week, after the Beijing-based company said sales will decline. The ADRs posted the biggest slump on the Bloomberg China-US Equity Index of the most-traded Chinese stocks. The measure added 0.7 percent last week, led by NetEase Inc. (NTES:US) and Trina Solar Ltd. (TSL:US) China Telecom Corp. traded at the biggest premium to the Hong Kong shares in two weeks.
LightInTheBox, whose $80 wedding gowns and $2 iPhone gadgets are manufactured in China and sold in the U.S. and Europe, reported on Aug. 19 second-quarter sales that failed to surpass analysts’ estimates and said revenue will decline in the following three months. The earnings miss could reduce future IPO prices at a time Baidu Inc.’s travel unit Qunar.com and operator of literary websites Cloudary Corp. plan to sell shares in the U.S., according to IPOX.
“It’s definitely going to affect perceptions about Chinese IPOs in the U.S.,” Josef Schuster, the founder of IPOX, an investment firm based in Chicago with about $2.5 billion under management, said by phone Aug. 23. “If you don’t meet your revenues promise, you get your multiples slashed, that’s what happened with LightInTheBox. I am 100 percent sure it’s going to affect all the IPO pricing going forward.”
Bill Zima, LightInTheBox’s external investor relations manager at ICR Inc., wasn’t available by telephone or e-mail Aug. 23.
Vipshop Holdings Ltd. (VIPS:US), an online fashion retailer based in Guangzhou that listed in the U.S. in March last year, has multiplied its IPO price sixfold to $40.47 as of last week. YY Inc. (YY:US), a social media website also based in Guangzhou, has more than tripled since its IPO in November.
LightInTheBox’s ADRs plunged to $9.87 last week following a four-day slide. After pricing at $9.5 per ADR, it jumped as much as 134 percent to $22.21 on Aug. 14.
LightInTheBox probably surged initially “because Vipshop has done so well as it met revenue targets and is very successful in the secondary market,” according to Schuster. “LightInTheBox is a different animal.”
Second-quarter revenue at LightInTheBox was $72.2 million, 4.7 percent short (LITB:US) of the average estimate of four analysts compiled by Bloomberg. It forecast in an Aug. 19 statement sales for July-September that also missed average projections by as much as 14 percent. Credit Suisse Group AG downgraded the company’s rating to the equivalent of sell last week.
The Shanghai Composite Index rose 1.4 percent to 2,086.49 at 12:02 p.m. local time after benchmark gauges fell last week. The Hang Seng China Enterprises index of Hong Kong-listed Chinese companies climbed 1.8 percent.
The iShares China Large-Cap ETF (FXI:US), the largest Chinese exchange-traded fund (FXI:US) in the U.S., slipped 1.4 percent last week to $35.66, losing the most in seven weeks. The Standard & Poor’s 500 Index added 0.5 percent in its the first weekly gain in three weeks, as investors watched Federal Reserve officials for signals on stimulus cuts after data showed home sales plunged.
NetEase, owner of a Chinese news portal, soared 19 percent in the five days to a record high of $75.42, the biggest weekly gain since February 2006.
The Beijing-based company started Yichat, a social instant messaging application last week, through a joint venture with China Telecom, the nation’s third-largest wireless network carrier. Downloads surpassed 1 million in the 24 hours after the application was introduced, China Telecom said.
China Telecom climbed 3.5 percent last week to a three-month high of $52.90. Its ADRs, each representing 100 underlying shares in Beijing-based China Telecom, traded 0.8 percent above its Hong Kong stock, the widest premium (CHA:US) since Aug. 8.
Trina Solar, China’s third-largest panel maker, jumped 32 percent last week to $9.44, the steepest weekly advance this year. Yingli Green Energy Holding Co. rallied 13 percent for the week while LDK Solar Co. gained 10 percent.
Trina raised its annual shipment forecast Aug. 20 after sales climbed to a record in the second quarter thanks to Asian demand. Pavel Molchanov, an analyst at Raymond James & Associates Inc. upgraded Trina to a hold equivalent Aug. 23, saying China is “on the cusp” of becoming the top driver of global photovoltaic demand.
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