IPO VIEW-Made in China? US tech investors want your stock

* Exchanges, bankers aggressively building China presence

* Youku debut biggest first-day pop in five years

* Chinese YouTube, Amazon encouraging others

* Chinese social networking companies likely next wave

* A 1990s tech bubble redux?

By Clare Baldwin and Melanie Lee

NEW YORK/SHANGHAI, Dec 10 (BestGrowthStock) – U.S. investors seem
to have an insatiable appetite for new Chinese tech stocks, and
some analysts wonder if the great tech bubble of the late 1990s
is repeating itself.

Online video company Youku.com Inc (YOKU.N: ), sometimes
referred to as the YouTube of China, sold shares in its IPO on
Tuesday, and rose 161 percent on its first day of trading,
locking in the best first day returns of an IPO in five
years.[ID:nN08142271]

Youku’s revenue was up 135 percent in the first nine months
of 2010 compared with a year earlier. But one thing the company
does not have is profit: its net loss widened by 22.5 percent
to 167 million yuan ($25.1 million) in the same period.

The U.S. has seen this before, and it did not end well.

In the late 1990s, companies with little more than a
business plan were able to raise millions of dollars in initial
public offerings. But in March 2000, the market started to
deflate, and the Nasdaq Composite, where many tech stocks were
listed, is still well below its prior peak.

Come January, the Nasdaq will have 11 employees combing
China looking for new businesses to list, said Bob McCooey,
head of listings for the exchange. That compares to two in the
United States, he added.

“Outside of the United States it’s China that is driving
the IPO market,” said McCooey, who also had his business cards
printed in both English and Mandarin.

McCooey said when he took over as head of listings, one of
the first things he did was order more lapel pins with a
crossed American and Chinese flag, because he realized China
was increasingly a source of U.S. listings.

China’s Internet sector is red hot because it is difficult
for outside competitors to overcome the political and cultural
barriers to operate in the nation. The number of potential
customers is massive in a country with a population of more
than 1.3 billion.

With interest rates in the United States likely to stay low
for some time, and economic growth expected to be tepid at
best, investors are seeking higher returns in fast-growing
economies.

But there are serious questions about how some of the
Chinese companies that are going public now will make money.

EVERYONE’S BUYING

For now, investors are keen for these stocks. Online
retailer E-Commerce China Dangdang (DANG.N: ), marketed as the
Amazon.com Inc (AMZN.O: ) of China, had more than 500 different
buyers in its IPO, a source familiar with the situation told
Reuters.

An IPO of that size — $272 million — listing in the
United States would typically have only 50 or 100 buyers, the
source said.

“It’s everyone. Everyone bought Dangdang,” the source said.
Dangdang’s buyers included funds in the Middle East, Asia and
Europe, according to the source.

Stock in the company, which went public on the same day as
Youku, soared 87 percent in its first day of trading.

Other Chinese companies are also lining up to cash in.

Tudou Holdings Ltd, another Chinese web TV service, has
filed with U.S. regulators to raise up to $100 million. It will
likely debut in the first quarter of 2011, a source said.

Social networking companies are likely the next wave of
Chinese Internet companies to seek U.S. listings.

Oak Pacific Interactive, owner of China’s largest social
networking site Renren, has tapped Credit Suisse AG (CSGN.VX: )
and Deutsche Bank AG (DBKGn.DE: ) for its U.S. IPO in the first
half of next year, sources told Reuters.[ID:nTOE6B904D]

TaoMee, a Chinese kids social networking site will conduct
its “beauty parade” for investment bankers in the first quarter
of 2011, while Kaixin001, another Facebook clone, is seeking a
2011 listing but has not tapped bankers, a source familiar with
the situation said.

Taobao, a unit of China’s largest e-commerce firm Alibaba
Group and the nation’s most popular consumer-oriented online
e-commerce website has had informal talks with banks about a
possible IPO, two sources familiar with the situation said.

“Everybody sees that this model can work,” that source
said. “Everyone is accelerating their schedule. They don’t want
to miss this window.”

TROUBLE IN THE MIDDLE KINGDOM

Youku’s debut show that investors are willing to put
profitability on hold — but at some point the companies will
need to perform.

“Investors are buying the runway, buying what the company
has predicted for 2012, 2013, rather than what has been
delivered so far,” McCooey said of the recent debuts. It’s up
to the companies to deliver profits, he added.

“We’re not kingmakers,” he said.

It hasn’t always been this way with Chinese tech companies.
China web search engine Baidu (BIDU.O: ) rose 354 percent in its
2005 debut but it was also profitable the day it went public.

There are also signs investors can become disenchanted in
these IPOs. For example, China-based online retailer Mecox Lane
Ltd. (MCOX.O: ) went public in October and its shares rose 56.9
percent.

But after Mecox posted quarterly results, its shares
plummeted, and now trade 37.7 percent below their initial offer
price. The company is being sued by its investors.

“Execution for these companies, particularly those that
have seen high first day increases, is going to be really
important. A lack of execution is going to put a damper on
other opportunities,” said Scott Cutler, head of listings at
NYSE Euronext.
(Reporting by Clare Baldwin in New York, Melanie Lee in
Shanghai and Doug Young, Denny Thomas and Michael Flaherty in
Hong Kong; Editing by Dan Wilchins and Sofina Mirza-Reid)

IPO VIEW-Made in China? US tech investors want your stock