Raising $192 million for development/R&D, marketing expenses, etc. China Digital started the day with shares priced at $16. With high demand for shares and a favorable market today, the stock (STV) opened at over twice that. As with some recent IPOs, profit-takers quickly sold with the stock ending the day below the opening price, closing at $28.
What's interesting is what may have drove demand for the stock. Compared with other IPOs of late, STV had been a relatively unassuming company operating in the digital television (DTV) industry. China Digital provides systems for DTV networks using conditional access, which controls access to content and services and blocks unauthorized access. Part of the interest in STV, as with other China stocks, is that it operates in China with the market's growth potential for consumer and industrial goods and number of consumers.
A Reuters report today cited a managing director of an IPO advisory firm in the US saying that "having the middle class being the fastest growing sector in China, allowing the capability for such a 'luxury', very much works to this IPO's favor and increases it allure."
How the middle class is defined though may depend on your criteria. A lot of consumers in China don't make a lot of money yet, although there are a growing number of people who have rising incomes comparable to what some middle class people in countries like the US are making. It'll be interesting to follow this IPO. Also STV's customers aren't directly Chinese consumers, so its success will depend on its products and service to DTV networks, as well as how digital TV does in China.
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