Recently, many Chinese tech companies were able to have very successful IPO in the U.S. But Sky-mobi, which listed on Dec 10, was an exception to this rule.

First of all, it scaled down its IPO size, from raising US$150 million to US$58 million.  Its share price also dropped significantly after the IPO.  It closed at US$5.3 a share last Friday, 33% less than its IPO price of US$8.

The Hangzhou based company is in fact running a very lucrative business.  It runs an app store over low-end phones in China.  Most of these phones are manufactured in the Guangdong or Shenzhen, using MediaTek chips.  They are the so-called Shanzhai Ji.

Sky-mobi app store is called “Maopao”.  But most of the 400 million plus users who had used it in the last 2 years were not aware of this.  Because it is preloaded on half of the Shanzhai Ji, through Sky-mobi’s relationship with the mobile phone designer houses.

The app store has over 700 applications.  And it relied on China Mobile or China Unicom to collect payment via the operators’ value added service providers (SP), such as Kongzhong.

Problems occurs when the operators wants to change their policies, which happens frequently.  Sky-mobi found it could not charge its users when China Mobile tightened its user protection policies in late 2009.  The problem extended to this year.

In fact, it is heard that Sky-mobi once hoped to get listed in March this year.  But the sudden drop in revenue made it changed its plan.  (It also changed its  investment bank.  Morgan Stanley, JP Morgan, etc. were no longer involved.)

From the hindsights, Sky-mobi might be better off not to list at all.  Not every business are suitable for the public market.  Some might be better to be run as a private firm.