Good timing?
The day a story appeared on the CNBC website in the US wondering if the time was right for a return to Wall Street by Chinese companies, Telstra (TLS) reveals plans to do just that for its Chinese web based car site, Autohome.
Good timing? Well judging by the upturn in interest in the past week, it could very well be the right time for Telstra.
The CNBC story wondered if the cloud was lifting over Chinese companies after so many previous listings had been undermined by accounting rorts, fraud or lies.
"If the surge in shares of two Chinese firms that listed in New York in the past week is anything to go by, appetite for U.S.-listed Chinese stocks may be making a comeback following accounting scandals that hurt sentiment and lead to a dearth of new listings last year.
"Shares of Qunar Cayman Islands more than doubled in their U.S. debut Friday, valuing the Chinese travel website controlled by internet giant Baidu at $1.05 billion. Shares of 58.com, a classifieds website dubbed China’s Craigslist, soared more than 45 percent when they started trading in New York on Thursday," CNBC reported.
The number of Chinese firms listing on Wall Street fell from a high of 40 in 2010 to just two in last year, according to data from Thomson Reuters.
Accounting scandals and a number of de-listings as a result of plunging share prices deterred Chinese companies wanting to list in New York.
Short sellers also attacked the shares of some of these companies, such as Sino Forests, driving them lower and helping to expose details of accounting fraud.
Yesterday Telstra said in a short statement to the ASX that it will list its majority-owned Chinese car sales website Autohome on the New York Stock Exchange.
Telstra says Autohome is the largest online car sales website in China (which is the world’s largest market for autos).
Some analysts claim the business could be valued at $1 billion, but that is pie in the sky stuff at the moment.
TLS YTD – Can Telstra catch a new China wave on Wall Street?
Analysts say the float is part of Telstra’s revamped Asia strategy which aims to increase its exposure to the fastest growing region in the world.
“Asia is a region of significant opportunity for Telstra but should not be viewed as a single homogenous market.
"We believe there are opportunities to be explored in various geographies and various industry segments but we need to make sure we are focused on the right assets,” Telstra CEO, David Thodey said in a statement to the ASX.
At a recent investor day briefing, the company said that chief financial officer Andy Penn, the former CEO of AXA Asia and Pacific Holdings, would work with Tim Chen, head of Telstra International on the company’s Asia strategy.
After the float, Telstra will retain its control over the company and Mr Chen will stay on the chairman of the new listed entity.
Telstra will control 51% of voting rights as long as it holds 39.3% of Autohome’s shares. That could be worth half a billion dollars all up.
But that’s not much money given Telstra’s sheer size.
The interest is in where the shares in Autohome head once listed, and whether a bigger company, such as the giant Baidu, takes a liking to them and makes a bid.
A prospectus has been lodged with the US regulator, the Securities and Exchange Commission.
Telstra recently boosted its stake in Autohome to 71.5% from 66% ahead of the IPO.
The news had no impact on Telstra shares yesterday which closed steady on $5.14.
