Tale of Two IPOs: NetSpend Vs. ShangPharma (NTSP, SHP, META, GDOT)

Overseas initial public offerings have been doing very well in the U.S.of late.  Today brought on two more IPOs, with an American IPO doing well and a Chinese offering not doing well.  Shanghai, China-based ShangPharma Corp. (NYSE: SHP) fell today while U.S.-based NetSpend Holdings Inc. (NASDAQ: NTSP) saw a gain.

ShangPharma sounds hot on the surface as it is a contract research and lab company which conducts R&D for pharma and biotech companies.  Citigroup and J.P. Morgan led the ShangPharma IPO.  Shares opened around $15.00 right around the IPO price, but shares were challenging $13.50 earlier.  The IPO was 5.8 million ADS shares and the expected price range had been $14.50 to $16.50.  China’s surprise rate hike may have taken some fuel from this but that is just a disappointment in general.  The company managed to grow through the financial crisis and revenues in the Jan-Jun period of 2010 were up by what appears to be more than 25% around $42 million while listing $6.9 million in net income.

Netspend is a reloadable prepaid debit card company and was supposed to be an IPO last week but had to be delayed due to a disclosure from Meta Financial Group, Inc. (NASDAQ: CASH) that its MetaBank unit, which issues about 70% of its cards, disclosed that the Office of Thrift & Supervision determined that Metabank had engaged in deceptive acts and practices. MetaBank might not be a direct threat, but that is a huge business partner under scrutiny. NetSpend is now planning to move 15% of its business away from MetaBank.  It also outlined that the cost to move its business in that manner would cost about $2.5 to $3.5 million.

NetSpend priced at $11.00 and opened around $11.20 before heading north of $12.50 with more than 8 million shares traded mid-afternoon.  The deal was led by Goldman Sachs and Bank Of America. Merrill Lynch.  If it sounds like GreenDot (NYSE: GDOT), there is a reason… The two companies are competitors for much of the same funds or related funds around the ‘under-banked’ society that now exists today after the financial crisis.

Part of the issue is that the companies were selling shares and insiders were selling shares as well.  On NetSpend, that was only about 2.2 million shares being sold by the company and 16.2+ million being sold by holders.  ShangPharm sold 3,200,000 ADS shares while certain shareholders sold an additional 2,600,000 million shares.

JON C. OGG