NEW YORK — Shares of Chinese film studio Bona Film Group Ltd. plummeted more than 20 percent during an initial public offering Thursday.
The offer of 11.7 million American depositary shares was priced at $8.50 each, in the middle of the company's expected range of $7 to $9.
Bona produces martial arts films, including the 2010 adventure movie "Little Big Soldier" starring Jackie Chan. It also has a film advertising business and a talent agency. Within China, it faces formidable competition from larger, state-run studios such as China Film Group Corp.
The Beijing company expects to net up to $83.8 million from the offering and says it will use the money for possible acquisitions, buying film distribution rights and investing in film productions.
Analyst Francis Gaskins, president of IPODesktop.com, said that Bona's stock has fallen not because of competition from state-run studios, but because it was overpriced compared with companies such as Regal Entertainment Group and Cinemark Holdings Inc., which distribute films but don't produce them.
"It's not that it's a bad company; they just overpriced it," he said, adding that investors may have been disturbed by the company's "lumpy," or inconsistent, quarterly results.
Analyst David Menlow, president of the firm IPOFinancial, added that the company's growth prospects aren't terribly impressive.
"I think what has probably held the company back is the growth of the company doesn't lend itself to a very explosive revenue curve," he said. "That's an issue that some people are probably going to wrestle with."
Underwriters will have 30 days to buy almost 1.8 million additional shares to cover excess demand, although those shares will be from selling shareholders. Bona Film will not receive any proceeds from the sale of those shares. BofA Merrill Lynch and J.P. Morgan Securities lead the group of underwriters, which also includes Piper Jaffray, Cowen and Co. and Beijing-based CICC.
Bona Film Group has received private funding from Skillgreat Ltd., Sequoia Funds, SIG China Investment One Ltd., and Matrix Partners China Funds, along with other unnamed shareholders.
Since Bona's founding in 2003, it has distributed 139 films, including 29 internationally. For the nine months ended Sept. 30, it posted a net loss of $7.4 million, compared with a profit of $1.5 million a year earlier, while revenue more than doubled to $35 million from $15.5 million. The company said its expenses were higher due to an acquisition and other costs.
In 2009, it brought in $926.7 million in box offices sales, and estimates it will rake in $1.54 billion in ticket sales 2010.
Bona Film Group trades under the ticker symbol "BONA." Shares of the company fell $1.54, or 18 percent, to $6.99 in afternoon trading Thursday, after falling as low as $6.45 intraday.
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BONA is bounce back up today. |
