IPO Drought Ends as Tarena Posts Debut Advance: China Overnight

Apr 03, 2014 7:05 pm ET

April 3 (Bloomberg) -- Tarena International Inc., the first Chinese company to debut in New York this year, rallied as investors bet the provider of education services will benefit from economic growth that’s the fastest in Asia.

The stock rose as much as 20 percent to $10.80 in its first day of trading on the Nasdaq Stock Market after the company raised $138 million at $9 a piece. Tarena closed at $9.06 in New York. The Bloomberg index of the most-traded Chinese stocks in the U.S. dropped 1.4 percent, the biggest decline in three weeks, as YY Inc., owner of a social entertainment website, tumbled 7.1 percent.

Tarena’s initial public offering was the first of eight Chinese offerings planned for this year including Alibaba Group Holding Ltd., according to data compiled by Bloomberg. The largest IPO in New York last year -- classifieds website operator 58.com Inc. -- has more than doubled since its October debut. China’s economy will probably grow 7.4 percent this year, faster than the average 6.2 expansion rate in Asia, according to economists estimates compiled by Bloomberg.

“It’s in a growth market,” Francis Gaskins, research director at financial media site Equities.com, said in a telephone interview from Marina del Ray, California. “They’re a leader in a niche market, and their top-line revenue is growing and they have good gross margins and they’re profitable - those are the things that’ll catch the IPO buyers’ eyes.”

Revenue at Tarena, which provides job-oriented education, jumped 63 percent to $92.8 million in 2013, according to the company’s filing.

Education Spending

Urban households in China spend more than 30 percent of their disposable incomes on education, 67 percent of which goes to services such as after-school tutoring, according to a February Citigroup Inc. report, which cited 2012 figures from newspaper China Youth Daily.

China-based companies from microblogging site Weibo Corp. to real-estate website Leju Holdings Ltd. have announced more than $2.5 billion of U.S. initial public offerings in 2014, data compiled by Bloomberg show. That’s the most since the fourth quarter of 2007.

The median gain of the eight Chinese companies to debut last year was 102 percent as of April 1, data compiled by Bloomberg show. By comparison, 179 U.S.-based companies rose by an average 34 percent since their 2013 IPOs.

The iShares China Large-Cap ETF, the largest Chinese exchange-traded fund in the U.S., fell 0.3 percent to $35.75, its lowest price in a week. The Hang Seng China Enterprises Index in Hong Kong gained 0.7 percent to 10,093.80. The Shanghai Composite Index dropped the most in a week, falling 0.7 percent to 2,043.70.