China IPOs Falling Off the Wall

SHANGHAI – A few months after China’s largest chipmaker and VC-backed Semiconductor Manufacturing International Corp. (SMIC) launched a $1 billion IPO on a U.S. exchange, two more VC-backed Chinese companies are ready to follow suit.

KongZhong and Mtone Wireless – venture-backed service providers for mobile phone users in China – each filed registration papers for IPOs.

KongZhong, (proposed Nasdaq: KONG) is backed by Draper Fisher Jurvetson ePlanet Ventures and two Chinese entrepreneurs. The company, whose name translates to English as “in the air,” had barely $8 million in revenue last year and ended its first ever-profitable quarter in March before filing for its IPO earlier this month. KongZhong has raised just over $3 million in venture funding. It aims to sell 10 million shares at between $10 and $12 a share.

Mtone (proposed Nasdaq: MTWI) is backed by iGlobe Partners Funds, Institutional Venture Partners, W.I. Harper, and Alpine Technology Ventures. It reported revenue of $22 million last year and filed for a $55 million IPO in April. The company has raised more than $85 million in funding.

The two companies – whose principal source of revenue is the provision of ring tones, games and messaging services to the general public – have filed their IPOs at a time when the appetite among investors for Chinese public offerings is mixed.

After all, among the poorest performing IPOs lately is a pair of China-based, venture-backed startups. SMIC (NYSE: SMI), a Shanghai-based semiconductor foundry, and Linktone (Nasdaq: LTON), a Shanghai-based provider of services to mobile phone users in China, were both trading at about 30% below their offering prices last week.

However, two other recent IPOs by China-based providers of services to mobile phone or Internet users are faring slightly better in the aftermarket. Shanda Interactive Entertainment (Nasdaq: SNDA), China’s largest online gaming provider and which Softbank Ventures and Cisco Systems back, went public in May at $11 a share. As of the close of trading last Thursday, the stock for the Shanghai-based company was at $15.75.

And Tom Online (Nasdaq: TOMO), a provider of services to mobile phone users, is principally backed by Hutchinson Whampoa and various Li Ka-Shing entities. The Beijing-based company had its stock kick off at around $12 per share in March. Last Thursday, it closed at $13.88 a share.

Meanwhile, there are several U.S. venture-backed China-based software and Internet companies all waiting to see how KongZhong and Mtone fare in their IPOs, and how the stock prices of Linktone, Shanda and the others hold up.

Among those sitting on deck for potential IPO filing include, China’s leading employment portal (and backed by DCM – Doll Capital Management); Hurray!, another mobile cell phone services provider (backed by Granite Global Ventures); a travel portal (backed by Tiger Technology Fund and Blueridge Capital); Corp., an e-commerce portal for China (backed by Granite, Softbank, Fidelity Capital, Venture TDF and others); and Baidu. (backed by DFJ ePlanet and Google).