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The Chinese Google IPO, began with $27 this morning and being trade at ~$74
Google has 3% in the company.
The shares of China's largest Web search company, Baidu.com, almost tripled in their market debut on Friday after pricing above their expected range in a hot initial public offering.
Baidu.com shares surged about 195 percent, to about $78, in morning Nasdaq trading from their initial public offering price of $27 per American depositary share, which was $2 above the top of an already raised price range.
Comparisons between the Beijing-based company and world search leader Google, which owns 2.6 percent of Baidu, had sparked strong interest in the offering, the first U.S. listing for a pure-play Chinese search engine company.
"People are buying shares in Baidu because of Google," said Tat Au Yeung, managing director of Apex Capital Management in Hong Kong. "But the pricing looks expensive."
Baidu priced its American Depositary Shares at $27 each--$2 a share above the top of an already raised price range--in a deal that valued the company at $872 million.
Analyst predictions for the stock's debut were generally well off the mark.
One analyst at a major U.S. brokerage predicted the stock would jump as much as 30 percent to $30 to $35 on its first day as investors who could not get IPO shares scramble into the market.
"The issue is very small and demand is very big," the analyst said.
But another Internet analyst with a Western bank in Hong Kong said the counter likley would climb by around just 10 percent on its debut as the IPO price was fixed above the proposed range.
After generating a wealth of investor demand, Baidu on Wednesday raised its indicative price range from $19 to $21 per American Depositary Share to $23 to $25 per ADS and increased its offering to 4.04 million American Depositary Shares, from 3.7 million.
Analysts have questioned Baidu.com's high valuation, which is largely based on assumptions of strong growth in China.
Baidu sold 12.5 percent of its enlarged share capital at 540 times historical earnings per ADS of 5 cents each. By comparison, Google and Chinese Web portal Sina trade at 87 times and 32 times 2004 earnings, respectively.
But Baidu, with a market value about one-hundredth of Google's, offers better growth prospects as China now accounts for just a tiny fraction of the $8 billion global search market.
Baidu generated earnings of $1.48 million (12 million yuan) on revenue of $13.7 million in 2004, compared to a net loss of $1 million in 2003.
Its earnings in the first quarter jumped 140 percent to $308,500 from the year-ago period, according to a filing.
Baidu said it will use funds from the IPO to develop or buy new technology and products and for general corporate purposes.
Five-year-old Baidu, whose name comes from an ancient Chinese poem about a man in search of love, is the clear leader in China's search market, which was worth about $150 million last year, according to new media consultant Shanghai iResearch, but is forecast to grow rapidly in the next few years.
China is the world's second-largest Internet market with about 100 million users but e-commerce is still relatively underdeveloped, largely due to lack of effective payment channels. The number of Internet search users is projected to grow to 187 million in 2007, according to iResearch.
Google and its rival Yahoo are eyeing Baidu's fledgling home market and domestic competition growing with search engines recently launched by two Chinese Internet veterans, Sohu.com and Sina.
Baidu, led by co-founder Robin Li, hired Goldman Sachs, Credit Suisse First Boston and Piper Jaffray as underwriters.
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