Bejing Based CDN ChinaCache Aims To Raise $100M In IPO

Content delivery network ChinaCache filed yesterday with the SEC to raise $100M in an IPO. The company, which is based in Bejing, plans to list on the NASDAQ under the symbol CCIH.  Deutsche Bank Securities and BofA Merrill Lynch are the lead underwriters on the deal but as of yet, no share pricing has been announced. Last year, ChinaCache had revenues of $40M and from estimates I heard, was on track to do between $60-$65M in revenue this year. Read the filing here.

Comments

[robin]

Lackluster prospectus. Their filing reports that their revenues in the past 6 months rose 29% but they still lost more (CNY24.2 million) than in the same period in 2009. Which means the business is becoming less and less profitable over time. In this environment, good luck.

[JN]

Is this a joke? <25% Gross Margins? You call that a business?

[investor]

ChinaCache is trying to raise 61M which means their valuation premoney is 180M. Their value of last round was 120M. The VC only gets 50% gain. Everytime you see this kind of IPO, you better be careful.

[investor 2]

@ investor, 50% gain if they are lucky. A big loss if they are not. CC's valuation in prior private rounds was rumored to be $200MM +, so its likely that some VC investors suffer down round valuation. Even down to IPO pricing. The company raised at least US$50MM+ financing before and still needs IPO $ to avoid going bankrupt with big cash burn. With the 180 day lockup its not a foregone conclusion that the VCs will make any money in this deal.

[Serious Investor]

ChinaCache(CCIH) is falsifying their SEC financial statements.

In 2008, Shanghai Jnet, a wholly owned subsidary of ChinaCache had only RMB3.25M in revenue in its financial filings with China’s State Administration for Industry and Commerce(“AIC”). But in the SEC F-1 filing on page 86, the revenue is RMB33.5 which accounts for 11.7% of ChinaCache’s 2008 revenue. The AIC-reported revenue is substantially lower than SEC-reported financial figures. This provides material evidence that CCIH is fabricating its SEC financials.

CCIH management and insider shareholders live in China. The AIC filings are filed with the Chinese government, whereas the SEC filings are filed with the U.S. government. Management is concerned about violating Chinese law and providing false information to the Chinese government. But they are indifferent to defrauding the US government and breaking US law. A Chinese resident does not have to obey U.S. law any more than a U.S. resident is required to obey Chinese law. That’s why they report the accurate numbers to the Chinese government, and the fake numbers to the U.S. government. There are practically no repercussions to Chinese management teams that defraud foreign investors. Numerous U.S.-listed companies, like CXTI, CYXI and CHFI, have seen their management teams vanish with the companies' assets, and suffer no legal repercussions. Defrauding U.S. investors is not a violation of Chinese law, whereas defrauding the Chinese government is.

If the AIC-reported financial statement is false, it will face a lawsuit or penalty from the government and this risk is not disclosed and it’s big hidden risk to the investors.