Checking in from China

I talked to my wife tonight on the phone. She has been in China with my son since early last week. They are doing very well. Life in Shanghai is not as comfortable or convenient as it is in Seoul, but she’s glad she went home to spend time with family. My wife and son are staying with my in-laws, who as you might recall returned to China last December before we left for Seoul. My sister-in-law’s family, who also live in Shanghai, met my son for the first time. My son has really taken a liking to his aunt (probably because she is a lot like his mom, her sister). They all live in pretty cramped quarters and have had a few minor family quarrels, but all in all, the visit has been a good one. My son really misses me. Whenever he sees a photo of me, he says excitedly, “Baba!” the Chinese word for “daddy.” I can’t wait to see them again. My temporary, pseudo-bachelor life has its good moments, but there’s nothing like being with the ones you love.

My son is apparently quite a celebrity in China. As a mixed-blooded child—half American, half-Chinese—he obviously looks different than Chinese children. My wife told me that strangers go out of the way to meet the little guy because he looks so different. She recently took him to a neighborhood photography studio for a photo session. The session so well that the studio acquired the rights to his photos and will display his album as a studio sample. He is a very photogenic kid. (I’m glad he inherited his mother’s good looks!) Although my son has been noticed here in Seoul, he has gotten far more attention in China than he has in Korea. This may be because Koreans have seen so many foreigners and mixed-blooded children that they are no longer a novelty. Chinese, on the other hand, have experienced much less exposure to foreigners and have met few mixed-blooded children. When I first visited China in 1994, I received many inquisitive looks from Chinese. I was a bit of a novelty, even when I was in Shanghai. However, in recent years the foreign mystique has diminished, and many Chinese now won’t give foreigners a second glance.

On the other hand, mixed-blooded children in China born to a foreign parent are still relatively rare. As a result, like my son, mixed-blooded children still elicit stares from Chinese. And Chinese typically hold them in high regard. Some Chinese believe that mixed-blooded children are physically more beautiful than either full-blooded Chinese or foreigner (e.g. Western) children. A recent poll indicated that 63% of Chinese would like to marry a foreigner. During my 1994 visit to China, my wife and I received critical stares from strangers who disapproved of our bi-racial relationship. Now, our mixed marriage is apparently hip. Attitudes in China have changed dramatically in the past decade. This may explain why Chinese are generally favorably disposed to mixed-blooded children. Rather than being a social burden, mixed-blooded children have become a status symbol of sorts.

Koreans, in contrast, typically do not hold mixed-blooded children in such high esteem. Koreans tend to prefer full-blooded Korean or non-Korean children. This is partly due to the fact that some mixed-blooded children in Korea are born out of wedlock to Korean mothers who are abandoned by foreign partners (particularly soldiers) who leave the country. Many of these children are born into unfortunate circumstances where the father reneges on his responsibility to take care of the child and disappears from their life. It is a very interesting contrast between two cultures that are similar in many ways but differ in some key social aspects. It is partly a product of cultural and historical influences.

Spring must be here

Spring must finally be here.  The pheasant family that lives nearby has been more active than usual.  I came home today and heard the sound of frogs croaking in the distance.  I heard the low rumble of the magpies announcing their territorial aspirations.  Our neighbor put out their lawn table and chairs.  The lawn is looking a little greener, and I will soon have to break out the water hose and lawnmower.  The first mosquitoes of the year appeared today.  One tried to land on my hand, but I brushed him off and darted into my house quickly.  I’ve heard that the mosquitoes will continue to buzz all year until sometime in December when the last one dies inside one’s home.  While I don’t like mosquitoes (who does?), it’s nice to see nature waking up and blessing us with more beauty.  Mosquitoes are preferable to hibernating nature.  The landscape was previously dingy with dead grass and barren, skeletal trees, but soon the cherry blossoms will bloom and the trees will grow leaves again.  Korea is beautiful in the spring.  Barring any Yellow Sand, this is the best time of the year to be in Korea.

Should I buy Morningstar?

Last Friday Morningstar, an independent investment research house, announced the terms of its upcoming initial public offering (IPO).  Morningstar will go public in a Dutch auction IPO on May 2, 2005.   7,612,500 shares will float at a price of $16-$19 per share.  At $17.50 per share Morningstar would have a market capitalization of just under $673 million, making it a small cap stock.  Morningstar will list on NASDAQ, and its ticker symbol will be MORN.  It will be the first high-profile Dutch auction IPO since Google’s wildly successful IPO in August 2004.  It is highly anticipated, and it could be another bellweather for other Dutch auction IPOs.

 

If you recall, I purchased shares of Google at IPO and did very well before I sold them earlier this year.  Google’s current share price is still less than what I earned when I sold my shares.  Because of my Google experience, I am very bullish on Dutch auction IPOs.  IPOs are traditionally the realm of insiders and institutional investors, but Dutch auctions allows small investors like me to get involved in initial public offerings.  Google’s IPO turned the investor hierarchy on its head, and small investors like me did very well.  We sat back and watched in amusement as large institutions such as Fidelity scrambled to catch up and buy Google shares weeks after the IPO.  I am hoping that lightning will strike twice through Dutch auction IPO, and I am contemplating buying shares of Morningstar at IPO.  It’s possible because I opened an OpenIPO account with W.R. Hambrecht, the bank that will run Morningstar’s auction.  (You too can open a Hambrecht account and still participate in the Morningstar IPO.  Don’t delay or you’ll miss it.) 

 

Purchasing shares of Morningstar at IPO is very attractive.  However, in the near term it may not be the best investment decision.  If I do purchase shares, I will only devote a small amount of capital to invest in MORN.  I believe that over the next few months MORN could return 25% or more above the IPO price, but there will be pitfalls.  I could be wrong.  For one, the market has been soft lately.  Many IPOs since Google’s have not done well.  Secondly, this IPO is highly anticipated, meaning that many investors will bid the price up.  MORN will likely debut at $19/share, the high end of its price range.  Thirdly, IPO stocks tend to dip a few days after IPO and can be purchased at a cheaper price than at IPO.  Fourth, Morningstar is not Google.  Its investment ratings system is an industry standard, but it is not a high-growth or tech stock like Google is.  Morningstar is also unprofitable, although it could be profitable in the coming years.  Much of the hype surrounding this IPO lies in the fact that it is a recognizable name using an unorthodox IPO method popularized by Google.  Fifth, Chief Executive Officer Joe Mansueto will still own 78% of the company after IPO and will have firm control over it.  He could nix any mergers or buyouts.  Lastly, Morningstar must also comply with a Securities and Exchange Commission probe currently underway and may face fines for impropriety. 

 

Still, here is why I believe Morningstar will be worth the investment.  For one, popular IPOs have done extremely well over the past year since the IPO market began to heat up again.  I also did well with DreamWorks Animation.  I missed out on the IPO but purchased shares on a dip the following week.  In addition, MORN is an industry standard in the financial sector, a sector with high growth potential.  In an age when investment banks must set up independent research houses to comply with terms of settlement reached with New York Attorney General Eliot Spitzer, Morningstar will shine.  Banks will have to buy independent research and will rely increasingly on Morningstar research and ratings.  The Dutch auction IPO will also ensure a fairer price for Morningstar, so the stock will not be substantially overvalued after IPO.  Finally, Morningstar will be a small cap stock with plenty of room for growth.  By contrast, Google’s market capitalization is already $56.20 billion, 83 times larger than Morningstar’s will be at IPO.

 

I am bullish on a few upcoming IPOs.  I would love to buy shares of investment bank Lazard, which will soon go public through a traditional IPO.  There are rumblings that the New York Stock Exchange will pursue an IPO in the future.  To that I say, “Buy, buy, buy!”  If no-frills classified web site Craigslist ever goes public, I would stand in line all night waiting to buy shares.  However, these will be traditional IPOs, and small investors will not have the opportunity to buy shares at IPO.  I prefer getting in on the ground floor with a company like Morningstar.