Economy

ChinaCache IPO hails a big success

By Ariel Tung (China Daily)
Updated: 2010-10-06 08:25

NEW YORK - Investors' optimism soared high as Beijing-based ChinaCache International Holdings made its United States market debut on Friday, raising $84 million on the Nasdaq.

Shares of the top Internet service provider company, whose clients include China Mobile, Sina and Alibaba Group, surged as much as 95 percent during the initial public offering (IPO).

Related readings:  ChinaCache makes big splash onto Nasdaq  ChinaCache: the Chinese Internet courier

It was the most impressive first-day gain for a US IPO in three years and revealed strong confidence in China's Internet growth. It also coincided with news that the number of Internet users in China now surpasses the entire population of the US.

ChinaCache's IPO bucked the trend in US stock markets, which have deteriorated recently. Many companies have delayed their offerings. Some Chinese companies including China Education Inc have withdrawn planned offerings.

ChinaCache's decision to go ahead was timely, said the company's founder, Chief Executive Officer Wang Song. The company wants to strengthen its operations in the growing market primarily driven by mobile Internet and Internet videos.

"The future growth of China's Internet is very promising. We want to be able to capture the market before the next wave of Internet development in China. We want to get ready for it," Wang said. "As to why we choose to be listed here, the majority of investors in Asia may not know our company that well. But in the US, they know about our company. They asked us, 'How do you compare yourself with Akamai?' As a leading Internet service company in China, we feel we are in a position to be listed on the US market, to be compared with other leading companies in the technology area."

The company, which conducts 90 percent of its business in China, has enjoyed growing revenues over the past few years, although it has not yet turned a profit. Its revenue suffered a sharp drop in 2009, which was attributed to the global economic downturn and a business model that focused primarily on a base of low-value and high-risk customers, said Wang.

Since then, the company has changed its business model and built up a more stable and balanced customer base, raising revenues have significantly, said Wang. Its clients have more than doubled over the past three years. As of June this year, ChinaCache had a total of 418 clients.

The company is the first non-telecommunications carrier to receive a nationwide operating permit to provide Internet services in China. Its clients pay for its services either through a monthly fixed bandwidth or traffic volume usage, or choose a plan based on actual bandwidth and traffic volume used.

The company, poised for strong growth, will continue to focus its business within China, said Wang. The $84 million proceeds from the sale of a 6.1 million American depositary receipts at $13.90 each will enable the company to fund research and development, as well as to expand its Internet network and systems.