Xinhua Finance Media, a play on China's booming wealth management sector, didn't choose the best week for its US listing.
Despite the enthusiasm shown by Fredy Bush, XFMedia's CEO, at Nasdaq's opening bell (see picture), XFMedia's share price slumped during its first day of trading last Friday and before opening today it was down 16% on the offer price, priced in the middle of the range.
Who said China IPOs are a sure bet? We certainly didn't but its worth remembering that XFMedia is likely to be a pretty solid long-term investment — unlike some of the China-focussed stocks listed in the west.
XFMedia is a media business that distributes its content via TV, radio, newspapers, magazines and other channels. It sells advertising for the Economic Observer newspaper and Money Journal magazine among other print media. Last year, the company posted net revenue of $59m with a net income of $3.3m.
XFMedia's largest shareholder is Tokyo-listed Xinhua Finance, which is linked to China's official Xinhua news agency and whose western ambitions EngagingChina has written about several times — most recently here.
Xinhua Finance has a strong grip on the domestic distribution of high-value financial information and is in a privileged position to ride China's investment boom, particularly when compared with western rivals like Reuters and Bloomberg.
While Xinhua Finance distributes its content to financial institutions and news agencies, XFMedia is more of a consumer play as it focusses on high net worth individuals with its “affluent lifestyle” programming.
That's a good business to be in as China now has 250,000 millionaire households, according to the Boston Consulting Group and the number is growing rapidly. But its worth remembering that XFMedia relies heavily on traditional media to generate ad revenue and so investors shouldn't really expect too many fireworks as far as the share price is concerned.
XFMedia said the almost $300m raised from the IPO will be used to pay off debt to Xinhua Finance and to fund strategic acquisitions. Xinhua Finance has been quite active on the acquisition front, buying up a string of niche western financial information publishers, and so its possible that XFMedia will also seek to spread its wings outside China.
Struggling western “lifestyle” publishers looking for a Chinese connection — or simply new funds — should perhaps give Ms Bush a call.