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Xinhua Finance Media IPO Fiasco

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Xinhua Finance Media Limited (XFML) did not turn out to be another Home Inns or New Oriental, at its IPO debut last Friday. Besides the difference of market sentiment then and now, I think the fundamental reason lies within the company and the business itself.

First Xinhua Finance is in the media and advertising business. Note media industry is still heavily regulated in China, this is different from Home Inns’ economy hotel business, which is pretty much a free market (as long as they can secure the building).

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Xinhua Finance Media IPO Update

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(Update 07Mar07) I saw an updated F1 prospectus at SEC web site. So I would assume the IPO is still on?

Just heard from a friend in the States, this is not offical, but the rumor is the IPO is called off. I assume the reason is the recent sell off of Chinese stocks inside and outside China scared lots of potential foreign buyers.

IPO is a very interesting game for issuing companies, underwriters and buying institutions. Companies do the road show and get people excited. They also talked to underwriter to determine the issuing prices. The underwriters bought all these shares from companies at the issuing price and sell those shares to institutions (a.k.a, their buddies). They receive a fee from this transaction.

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Xinhua Finance Media Limited IPO

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Found this through my friend thesunsfinancialdiary. I briefly went through their F1 prospectus. I had to admit I’m not in best position to evaluate their business: they have 5 divisions providing services from creating adverstisement to customer research. I can think of a St. Louis based privately held company called Maritz which does something similar: they organized conferences for other companies, send promotional gifts for companies like Nissan, take care of the employee reward etc. One way to analyze Xinhua Finance (symbol: XFML) is comparing each division to a public company does something similar, then adding them up.  

On a related matter, the event marketing services in China is booming. About 2 years ago, during my Jiu Zhai Guo tour, I met a senior executive of a conference organizing company  based in Beijing, I learned about three most popular conference places in China: Shanya (Beach), Dali (Yun’nan), and Jiu Zhai Gou/Chengdu.  

By the way, the parent company of Xinhua Finance Media Limited is traded in Tokyo. Also, the CEO and co-founder of the company is Ms. Fredy Bush, not sure if she is related to the George Bush family…