Baidu.com makes spectacular debut

"It's got the Google concept, and people think Google might acquire it. And then there's the China growth factor -- everyone wants to be here."

Alan Qiu, managing director at Ucdao.com

The driving force behind the spectacular market debut of shares in the Chinese search-engine company Baidu.com (百度) on Friday was its resemblance and ties to Google, whose own offering created a sensation last year, analysts said over the weekend.

Shares in Baidu soared Friday on the NASDAQ stock market in one of the most successful initial public offerings since the peak of the dot-com era. The stock more than quadrupled by the end of the day, instantly creating the most valuable Internet company in China. The shares were priced at US$27 but opened at US$66 and then soared to US$122.54.

"This is the biggest pop since the Internet bubble burst," said Alan Qiu, a former stock trader and managing director at Ucdao.com (上海道宜網絡科技), an online gaming and trading company based in Shanghai.

"It's got the Google concept, and people think Google might acquire it. And then there's the China growth factor -- everyone wants to be here," he said.

Investors in Baidu include Google and the Silicon Valley venture-capital firms Draper Fisher Jurvetson and IDG Ventures.

Foreign investors are trying to cash in on an Internet boom in China, where there are now estimated to be about 100 million regular Internet users.

"Outsiders are betting on the growth of the Internet in China," said Huang Jia Li, an analyst at Shanghai iResearch (艾瑞市場諮詢), a consulting firm. "And over 80 percent of the Internet users in China are using Baidu.com as their search engine."

Over the weekend, several analysts questioned whether Baidu's stock had risen too sharply, creating comparisons with the dot-com era when some Internet companies soared in their debut, only to crash later on.

But others said that US investors were betting that Baidu would grow into a Chinese powerhouse.

Eyeing this huge market, US technology giants and venture capitalists have been rushing into China over the last few years, searching for the next Yahoo, Google, eBay or Amazon.com. A group of Chinese entrepreneurs in their 20s and 30s, many of them educated in the US, have been busy fashioning Chinese versions of American Internet companies.

They seem to be succeeding. Backed by foreign investments, Chinese companies like Sohu.com, Shanda Interactive Entertainment (盛大網路), Ctrip.com (攜程旅行網), Netease.com (網易) and Sina Corp (新浪) have all prospered with listings on the NASDAQ stock market in recent years.

Silicon Valley's biggest companies are also eager to participate. Last year, Yahoo acquired 3721, another successful Chinese search engine company. Then Google bought a 2.5 percent stake in Baidu.com for about US$5 million. After Friday's offering, that stake was worth close to US$100 million.

eBay has also come to China, acquiring an online company called Eachnet.com for about US$180 million. eBay says it plans to invest another US$100 million in China over the next few years.

Baidu is a 4-year-old company that had just US$13 million in revenue last year and about US$1.4 million in profit. But in China, Baidu is the search-engine leader, followed by Google, according to online research consultants.

The company hired Goldman Sachs and Credit Suisse First Boston to take it public. But even the giant investment banks seemed to underestimate demand for its offering.

The company is now valued at close to US$4 billion, and its co-founder and chief executive, 36-year-old Robin Li, is worth close to US$1 billion, easily making him one of China's richest entrepreneurs.

Baidu's investors also made a fortune on Friday. IDG, one of Baidu's earliest investors, watched the stake it acquired for US$1 million a few years ago jump to more than US$150 million.

And the 28 percent stake that Draper Fisher Jurvetson acquired over the last few years for about US$12 million is now valued at close to US$1 billion.