Environment for Overseas IPOs “Awful” Says Chinese Game Exec

The past few years have seen a number of successful Chinese tech companies make initial public offerings (IPOs) in the US markets. Tech giants like RenRen and Youku had successful debuts, but their stock prices have been rather volatile since then, and RenRen’s price is down more than $30 a share since their IPO. Things have gone even worse for some other companies. Tudou has struggled in their attempts to get on the market, and more recently both Shanda‘s Cloudary and Xunlei have pulled out of IPOs at the last second.

In fact, it’s gotten so bad that some tech CEOs believe the window to overseas IPOs has, at least temporarily, closed for Chinese companies. Zhang Fumao, the CEO of Beijing-based web game developer Youxigu, says that his company was originally planning to debut on the market this year, but has now pushed back to 2012.

“The current environment for overseas IPOs is truly awful,” Zhang told reporters. “Many American investors have doubts about Chinese companies entering the market, and funds are looking down on Chinese companies when they make their estimates.”

The main issue seems to be concerns with the veracity — or lack thereof — in the reports offered by some Chinese companies. “Especially for game companies,” Zhang said, “when we apply for IPOs, the user numbers, active user ratio, and the value of each individual user will all be called into question by American and European investors.”

Zhang insists that for any gaming company, the cashflow is sufficient, and there would be no reason for them to cook the books, but foreign investors remain skeptical. And so Zhang, his company, and many other China tech companies, will choose to sit on the sidelines for a while, building their profiles while — hopefully — some of the suspicion directed their way cools down.

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