SAN FRANCISCO -- If you missed out on Baidu.com ( BIDU), the "Chinese Google ( GOOG)," before its run-up, keep your eye on the IPO market. There are plenty of other koi in the sea.
Just look at Friday's New York Stock Exchange debut, China Digital TV ( STV), which priced at $16 and promptly doubled by midmorning. The company makes software and access cards for customers of pay cable, satellite and terrestrial television service operators in China. While American Depositary Receipts on Chinese companies represent a higher risk, that goes unacknowledged by the market, says MorningNotes' Ben Holmes. ADRs often enjoy unusual upside, especially during the fourth quarter. The fourth quarter in the IPO market is the "mark-up game," Holmes says. Buyers hold on to new issues that rise, at least until 2008, to show the gains on their year-end results. Providing, of course, that they do rise. A look at a few 2006 IPOs is instructive. Mindray Medical ( MR) was offered at $13.50 on Sept. 26, 2006 and ended up 30% its first trading day. The stock closed Thursday at $43.05. But then there's Solarfun Power ( SOLF), which went out at $12.50 on Dec. 20, 2006 and plunged 16.9% during its first trading day to close at $10.39. It closed Thursday at $12.80. Solarfun's roller coaster ride demonstrates the risks that Chinese ADRs pose to investors. During the past year, the stock has ranged from $8.22 to $17.69, and is stagnant at 30 cents above its offer price. But for every sob story, there's a first-comer.