The sky is the limit, but only for so long

By Neil Flynn (China Daily) Updated: 2014-07-21 07:15

Over the past year, with impressive equity returns and investor confidence sky high, many firms have made initial public offerings in the US. In particular, the fortunes of Chinese companies have changed more than any other firms in a short time.

In 2012, US-listed Chinese companies began to delist in large numbers because of concerns about accounting irregularities. But confidence has returned, and large Chinese firms such as the online travel site Qunar, the Twitter-like microblogging service Weibo and the online shopping sites Jumei and JD.com have listed in the US.

This change in fortunes is perhaps best illustrated by VIPShop Holdings, which listed on the New York Stock Exchange in 2012. At the time, the listing was disappointing, priced at $6.50, compared with the $8.50-$10.50 range. However, in just over two years, VIPShop is trading near $200. While this is largely due to improving investor confidence in Chinese equities, another factor is investors' interest in the Chinese online shopping industry. During the past year, most of these firms have turned in stellar performances, particularly as the industry's market leader, Alibaba, prepares to list in New York.

Its IPO will make it one of the largest firms listed in the US and, given the size of its earnings and revenues, investor appetite for online shopping equities will continue to grow.

In the splurge on IPOs in the US, investors have attached huge valuations to many firms. A recent example is GoPro, the mini high-definition camera maker, which adventurers use to film themselves in activities such as jumping out of aircraft or off cliffs. In the technology industry there is a shift toward wearable technology, and investors have taken advantage of the GoPro IPO to push it to the current price of $41.58, giving the company a market capitalization of $5.14 billion at the time of writing.

This shows a general appetite on Wall Street for technology IPOs, and investors are snapping up companies that describe themselves as being associated with "wearable technology", "cloud", "big data" or "Chinese online shopping".