China Tech Companies Listed in the US: What Now?
In the last post, we briefly mentioned the enormous size of Tencent and Baidu. Yes, what a cliché. But, sometimes people forget that these companies are so new. In fact, they are ALL new. Indeed, once can argue that the like of Google and Amazon are relatively new. But, Apple is not, and Microsoft is not, and so are the not so new IBM and many other tech companies.
When I say the tech companies from China are new, they are really new. Someone over the weekend asked how big are these tech companies and how are they doing now?
So, we spent a little time digging around. We thought it would be fun just to get a feel of what it has been like. We decide to only look at the ones that are listed in the U.S. --- simply for the ease of extracting data and also the earlier successful Chinese tech companies with the notable exception of Tencent, quite a significant number of them saw the listing at a US stock exchange as a holy grail (and how time has changed again.)
So, here are some statistic and rough rationale of our research:
There are over 100 China based companies listed in both the NASDAQ and the New York Stock Exchange.
Taking away the natural resources ones, the real estate ones, we try to count the number of ones that in most people's eyes are tech companies. There are roughly about 35 of them. (Here we must stress that the line of differentiation is very rough indeed. For instance, we did not count the drug companies nor the medical companies.) So, we are really looking at the counterparts of the Google, Linkedlin, Facebook, Zillow, Amazon, etc. And, we are not looking at the counterparts of Walgreen, or Pifzer, for instance.
Then, we look at their P/E ratio, year of IPO, and current market capitalization. We have also looked at the year they are formed, but we have decided that since almost all companies listed are formed after the millennium and that they are formed less than 10 years before IPO, we did not want to include too much data.
For the sake of simplicity, for those which are not profitable at this particular moment, we assigned a P/E of 0. (Obviously, this is technically wrong, but it does allow us later to present all the findings in a easier to read chart.)
And, since some readers may be more familiar with their Chinese name, we have added the names in the legends as well.
At least one company in the list is to be delisted (Ku6 Media) ; and one company is only recently listed (China Online Education).
16 of these 35 now report a negative P/E. 5 of these have a market cap over US$1B.
The Median P/E of these 35 companies is 6.17.
We can do more analysis at a later time. Here is a bubble chart of the findings. The size of the bubble reflects the market capitalization; the x-axis is the Year of IPO; and the Y-axis is the P/E.
A number of friends have written to us saying that the chart above was difficult to read. Our apologies. Instead of spending hours on Illustrator, I thought why why don't we just publish the raw spreadsheet so everyone can see. Just as a reminder, here we are using P/E = 0 if the company was not profitable rather than saying N/A. (This is just to allow easier charting.) I have manually typed in the Chinese names for each one. The sheet was created with Google Sheet.