Nasdaq-listed VisionChina Media, a Chinese out-of-home advertising company, has launched a follow-on offering which, based on the price at the close of trading on Friday, could raise around $162 million.Our take:
Of the 8 million American Depositary Shares (ADS) on offer, 1 million are primary while the remaining 7 million are existing shares that are being sold by shareholders cashing in on the significant rise since the company's listing. VisionChina was one of the most successful IPOs by a Chinese company last year, pricing its initial offering at $8 a share in December. The company’s share price closed at $20.34 on Friday, bucking the markets' downward trend.
The company expects to receive around $20 million from the follow-on and it has expressed its intention to use the proceeds for general corporate purposes, which may include purchasing complementary businesses.
We were excited by this news until reading that the funds would be used for "general corporate purposes." While that certainly doesn't preclude the company from using the cash to buy up some competing firms or growing their digital sign footprint organically, we have to wonder if their omission of the latter possibility means they're really just trying to take out an insurance policy against uncertain market conditions in the West and new limits on growth (including some from the government after the Olympics) in the East.