BrokerDealer.com blog extends thanks to the Wall Street Journal’s Shen Hong for providing coverage regarding the Xinhua News Agency initial public offering. See below link for full story. in Wall Street Journal today’s article.
SHANGHAI—China’s official news service is on track for an initial public offering of its digital arm, as Beijing seeks to transform its staid propaganda organs into modernized entities.
If the plan proceeds, China’s state-run Xinhua News Agency would become the second of the Communist Party’s state-run media outlets to sell stock to the public, following the IPO two years ago of People.cn Co. 603000.SH -3.31%, the website of the authorities’ flagship newspaper, the People’s Daily.
In recent years, Beijing has encouraged its state-run media to tap the capital markets for funds and to use modern tools to boost the influence of the propaganda machines that it has used for decades to deliver its message to the Chinese people. Analysts say the government also hopes its propaganda arms can help it to promote “soft power”—cultural heft around the world through media such as movies and television shows—as well as to develop a thriving domestic media industry.
Xinhuanet Co., which operates the 83-year-old news agency’s main website Xinhuanet.com, released the preliminary IPO prospectus for a listing on the Shanghai Stock Exchange on the Chinese securities regulator’s website late Friday.
In the 349-page document, Xinhuanet said it plans to raise 1.5 billion yuan (US$241.2 million) by issuing 51.90 million new shares. The company said it plans to use the proceeds to fund projects ranging from its digital platforms to a political-information database and new-media technology development.
Xinhuanet made a net profit of 167.35 million yuan last year, up 23% from 135.96 million yuan a year earlier. According to the prospectus, Xinhuanet’s gross profit margin was 63.3% last year, higher than People.cn’s 57.1% but lower than some of its privately run and commercialized peers such as Sohu.com‘s SOHU +0.48%65.7%.
As Xinhuanet’s largest shareholder, Xinhua news agency holds an 82.5% direct stake in the company.
“Xinhuanet’s IPO is part of the government’s long-term plan to develop China’s cultural industry, but given the extremely long queue of listing aspirants, this deal may not materialize until a year later,” said Zhang Gang, analyst at brokerdealer Central China Securities.
As a result of a 14-month IPO moratorium that ended in January, there are 674 companies on the waiting list for approvals.
Xinhua’s online arm runs one of China’s most-colorful state-run media websites. Xinhuanet.com offers everything from news on senior Chinese leaders’ whereabouts to photos of “breathtaking models” and information on how certain Japanese women tattoo themselves.
People.cn uses a similar recipe of attention-grabbing headlines and photo galleries to stand out. In November 2012, it drew international headlines when it quoted verbatim from an article in the satirical U.S. newspaper the Onion that proclaimed North Korean dictator Kim Jong Un the “sexiest man alive for 2012.”
China’s Internet market is growing quickly, with the country’s total number of users hitting 618 million as of Dec. 31 last year, up 53.58 million from a year earlier, Xinhuanet said in its prospectus.
Xinhua, which means New China in Chinese, is a pillar of China’s propaganda machine. Officials sometimes require local Chinese newspapers to run sanctioned Xinhua stories on controversial subjects instead of offering their own coverage.
Publishing news in eight languages, the Xinhua news agency has more than 140 bureaus around the world.