SpaceStation to Houston: what are those BIDU shares that have shot up into the stratosphere ?

Note: When I came back from lunch, the stock had shot up again to close at $122.54. What’s above the stratosphere ?

Baidu.com (BIDU) just made its debuts on Nasdaq, and went from an original IPO pricing of $14 to an pre-open price of  $27 to an open of $66 to $99 $122.54 in a couple of few hours. This chinese search engine, which is set to earn $12M on $30M of revenues, was awarded a $3.6B market cap – representing a 300x (forward) earnings multiple.

Bambi Francisco wrote in a note before the stock opened:

Due to healthy demand for the 4 million shares available — Baidu had intended to sell 3.7 million shares at $20 apiece — it’s hard to imagine this stock not trading at $30 or $40 some time in the near future, if not today.

Then a few minutes ago, in Baidu feels like Netcape redux, but where’s Meeker:

To the amazement and even awe of many traders on Wall Street, Baidu shares traded Friday at well above $90, more than three times its initial price of $27. See IPO Report.

Google vs BaiduEven though this looks like a bubble IPO, Bambi makes the point that there have not been that many interesting tech companies going out since GOOG a year ago. And China is a very big market. Still, a stock shooting 354% on the opening day makes you wonder. Actually, according to MarketWatch, “Baidu.com’s first-day gain ranks 18th in history and ranks as the best performance ever by an overseas deal”.

Digging a bit in this registration statement, you find the following information about the company’s 3 rounds of financing:

  • In February 2000, we sold a total of 4,800,000 shares of Series A convertible preferred shares in a private placement at a price of US$0.25 per share. Each of Integrity Partners, LLC and Peninsula Capital Fund, LLC purchased 2,400,000 shares from us in our Series A convertible preferred share private placement.
  • In September 2000, we sold a total of 9,600,000 shares of Series B convertible preferred shares in a private placement at a price of US$1.0415 per share. The investors in our Series B preferred share private placement consisted of Draper Fisher Jurvetson ePlanet Ventures L.P., which purchased 7,200,000 shares, IDG Technology Venture Investment L.P., which purchased 1,440,000 shares, Integrity Partners, LLC, which purchased 600,000 shares, and Peninsula Capital Fund, LLC, which purchased 360,000 shares.
  • In June 2004, we sold a total of 2,248,877 shares of Series C convertible preferred shares in a private placement at a price of US$6.67 per share. The investors in our Series C convertible preferred share private placement consisted of Google, Inc., which purchased 749,625 shares, Draper Fisher Jurvetson ePlanet Ventures L.P. and its affiliates, which purchased 749,625 shares, Integrity Partners V, LLC, which purchased 202,399 shares, Peninsula Capital Fund I, LLC, which purchased 193,403 shares, CMT CV-BD Limited, which purchased 164,918 shares, Venture TDF Technology Fund III LP, which purchased 149,926 shares, China Equity International Holding Company Limited (BVI), which purchased 23,988 shares, and Swiftcurrent Offshore, Ltd., which purchased 14,993 shares from us.

The largest shareholder in the company, Draper Fisher Jurvetson ePlanet, an affiliate of DFJ, invested $7.5M in the Series B, and $5M in the Series C. This $12.5M investment allowed them to own close to 8.2M shares worth today… $1B (and change). Not exactly the $2.4B that Sequoia and KP had (virtually) in their pocket at the close of the GOOG IPO day, but a heck of a deal. Congrats!

Update: Now, Reuters is pointing out that in this ‘95–like run-up, Baidu has actually missed on an opportunity to price higher. However, as CEO Robin Li is pointing out, Baidu only sold 4M shares and can enjoy its market capitalization of $3.6B. Li is now worth $800M (on paper), and pocketed about $6.5M selling 250,000 shares in the offering.

I would not be surprised if someone involved in Baidu today had said: “Told you we should not sell to Google”. Not too bad of a day for Google anyway, their 2.6% in Baidu is worth $100M (on paper).

More:


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