China Cleantech IPO Watch: Welcome to the Hangover
Source:Chief Editor, CCEN   Date:2010-02-08   Author:Tom Pellman

Last December marked the culmination of a heady year for Chinese cleantech IPOs. As wind power giant Longyuan Electric Power Group racked up US$2.2 billion in its Hong Kong debut – the second-largest-ever opening day for any cleantech firm – analysts were using words like “gold rush” to describe the coming year for Chinese cleantech companies. After all, Chinese green IPOs were a highlight of an otherwise dismal year for world markets. Of the year’s 32 cleantech IPOs worldwide, half of them were Chinese companies, accounting for more almost 75% of total IPO capital.


There seemed little concern for a slowdown this year. All signs – from huge domestic demand projections for solar  and wind products to continued signs of recovery from the economic downturn – pointed to a record year for Champagne sales in China.


Instead, the new year has begun more like Champagne hangover. A number of Chinese cleantech firms have watched their hopes for a successful overseas listing suddenly dissolve. Grand filings have been downsized if not scuttled altogether, citing weak investor interest. For those Chinese green firms that have made it to the opening bell, many of their stock prices have taken a beating since. What’s going on?


Solar firms have fared the worst. The industry as a whole is facing a major oversupply of polysilicon and subsequent pricing pressures. In the last month of 2009, the experience of Trony Solar, which produces thin-film solar modules, offered an ominous warning. Trony had planned to sell 19.5 million American Depository Shares at a price between US$9 and US$11. Instead, the day before its planned December 10 listing on the New York Stock Exchange (NYSE), the company postponed its IPO indefinitely saying market conditions were poor.


Then in late January, Daqo New Energy Corp, a polysilicon maker, followed nearly the same path – initially paring down its asking price by US$2-3 per share and then canceling its NYSE listing altogether. Same problem. JinkoSolar, yet another polysilicon producer, has filed for a US$100 million IPO on the NYSE for February 9. We will soon find out if it will complete the hat trick.


UPDATE 2/21/10 - JinkoSolar has in fact announced it will delay its NYSE IPO citing, what else, "poor market conditions." The hangover continues...


As mentioned, institutional concerns have hampered Chinese solar firms in the eyes of still-nervous investors, but other cleantech industries are also facing problems on the trading floor.


China Hydroelectric Corp., an owner and developer of hydropower plants in China, did succeed in listing on the NYSE on January 25, raising US$96 million. Its share price has steadily declined by 21% since then, however. Meanwhile, XD Electric, China’s largest maker of power transmission and distribution equipment, fell below its IPO price in Shanghai on January 26, the first mainland company to do so since 2006.


The list of listless list-ers keeps growing.


Perhaps the biggest litmus test for the listing power of Chinese clean energy companies in the new year is right around the corner. China’s largest wind power company, Xinjiang Goldwind, announced it is aiming to raise US$1.5 billion in a Hong Kong listing sometime in the first half of 2010. The firm is already listed domestically on the Shenzhen market.


Whenever Goldwind emerges from the approval process and does decide to list this year, the comparisons with Longyuan will be inevitable. Outperform or match the success of Longyuan’s December debut and Goldwind may bring the “gold rush” talkers back on out of the woodwork.


A high-profile disappointment on par with what we’ve seen thus far in 2010, and we may find ourselves wondering how long a Champagne hangover is really supposed to last.

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