Posted on 07 March 2012.
The Baidu IPO for Baidu.com Inc. (BIDU), which took place during August 2005, was the one of the biggest Initial Public Offering (IPO) of a Chinese company in the United States during the first decade of the 21st Century. Baidu is a China-based Internet search engine and web portal that, as of January 2012, has over 500 Million monthly users in China, Japan, Thailand, Egypt, and India.
From the beginning, Baidu has been compared to the United States based Internet search engine and web portal Google. This comparison to the highly successful American company, created a huge amount of interest in the Baidu IPO, as investors sought to buy the next company with growth the prospects of Google.
The Baidu IPO made a big move on its open day, closing at $122.54, which was an incredible 354% higher than the $27 per share IPO price. Adjusting the price of BIDU for the ten (10) for one (1) stock split that occurred in May 2010, BIDU has increased in price over 1,000% since its IPO day closing price, from a post split price of $12.25 the day of the Baidu IPO to over $132 today. The Baidu IPO raised $109 million, and included major Wall Street underwriters Goldman Sachs, Credit Suisse First Boston, and Piper Jaffray.
Even after the substantial increase in the price of BIDU shares that followed the Baidu IPO, BIDU still appears to be a good buy based on growth prospects in the future. Baidu is the dominant search engine in China, and it will likely remain the dominant search engine in China for the foreseeable future since there are many barriers to entry for foreign search engine companies considering doing business in China and Baidu’s domestic competition appears to be ineffective at challenging their dominant position.
Baidu is not sitting still pinning the future growth of the company on their dominant search engine product. Those who brought the Baidu IPO years ago, are now lucky to own a company that is ambitiously expanding into high growth and potentially highly profitable Internet businesses. Baidu is actively parlaying their position as the dominant search engine in China to develop additional high growth Internet businesses, including: social networking, mobile phone searches, online video, online music, and travel services.
In the fourth quarter of 2011, Baidu reported total revenue of $710 million and earnings per share of $0.93. Baidu’s reported earnings per share of $0.93 were 86% higher than the $0.50 earnings per share the company reported in the fourth quarter of 2010. The latest earnings report indicates that despite being a mature company that completed the Baidu IPO in 2005, Baidu’s earnings growth remains strong. Baidu’s dominant position in the world’s largest Internet market and their aggressive growth strategy bode well for the future of Baidu’s stock BIDU.
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