Shares More Than Quadruple After IPO

Shares of China's largest Web search company, Inc. (BIDU), more than quadrupled in value in their U.S. market debut Friday in the most spectacular entry ever by a foreign company, overshadowing world search leader Google Inc.'s (GOOG) float last year.

The meteoric debut of the Beijing-based company fed by investors hungry for a growth story was reminiscent of the Internet heyday, when shares of new online and technology companies routinely trebled on their first trading day.'s float, with its irresistible mix of China and the Internet, sparked huge interest globally, with the company described as a potential Chinese Google well placed to serve the world's most populous country, where Web use is surging.

But even analysts expecting a strong debut were stunned as shares more than quadrupled the $27 per American Depositary Share (ADS) pricing of its initial public offering, the first U.S. listing of a pure-play Chinese search engine.

"It's just been amazing. It could be over-enthusiasm, it could be the way Google charted, but there is obviously a lot of speculative buyers who think this could be an Asian Google," said Sal Morreale, who tracks IPOs for Cantor Fitzgerald (search). shares surged over 450 percent to a high of $151.21 during intraday trading on Nasdaq on Friday. They closed up almost 354 percent at $122.54.

A list of market debuts compiled by Dealogic showed this was the biggest one day gain by a foreign company in the United states and the largest gain of any company in five years.

Baidu, which takes its name from an ancient Chinese poem about a man in search of love, had its ADS priced at $27 late Thursday, having a day earlier raised its indicative price range to $23 to $25 a share from $19 to $21 amid strong investor demand. It also raised its offering size to 4.04 million ADS from 3.7 million.

Comparisons between and Google — which owns 2.6 percent of the Chinese company — generated strong interest in the offering, which raised about $109 million and valued the five-year-old company at $872 million.

Expectations for the small listing of about 12.5 percent of the company were high since Google's share price has more than tripled since it went public a year ago.'s market capitalization quickly soared to about $4 billion as its stock rocketed — but still only a fraction of Google's market value of about $82 billion.

Chief Executive Robin Li, who co-founded the company five year ago, downplayed the extraordinary market debut, saying his main purpose was to ensure Chinese Web users had good access to information, with his company focused on growth within China.

"Our job is to solidify and expand from here. We think there's lots of room for us to grow," he told reporters.

Li, 37, whose 22.4 percent in after the offering made him close to a billionaire, side-stepped questions about reports that rejected a takeover bid from Google.

"We are happy to have Google as an investor," he said.

He also refused to be drawn into debate on whether his bankers were at fault for being so off when pricing the IPO. hired Goldman Sachs, Credit Suisse First Boston and Piper Jaffray as its underwriters. None of the banks would comment on the pricing on Friday.

Tom Taulli, a portfolio manager and IPO analyst at Instream Partners, Newport Beach, Calif., said a lot of people who made money on Google's float wanted to find the next winner.

"I think some Google money has gone into this company," he said. "I would not be surprised if Baidu does a secondary offering in the next few months to raise more money."'s move public came amid insatiable investor interest in China, the world's second-largest Internet market.

New-media consultant Shanghai iResearch has projected the number of Chinese Internet search users will rise to about 187 million in 2007 from about 115 million in 2005 — with great potential for future growth in a population of 1.3 billion.

Google and Yahoo Inc. are eyeing the fledgling market in China, where e-commerce is relatively underdeveloped, largely due to a lack of effective payment channels.

But remains the most popular search engine, while two other Chinese Web veterans, Inc. (search) and Sina Corp. (search) , have recently launched search engines.

Li dismissed suggestions that the Chinese government would crackdown on Internet companies, saying it was actually pro-internet and understood the benefits to China's economy.

But analysts questioned's valuation, which is largely based on the assumption of strong growth in China.'s ADS are trading at a multiple of 279 times its 2004 revenue of $14.2 million while Google's comparable multiple is 26 on 2004 revenue of $3.2 billion.

"It's dangerous to predict the future, but every one of the IPOs that went up more than 300 percent on the first day has ended badly for investors," said University of Florida Professor Jay Ritter, an IPO expert.