As one of China's leading independent auto manufacturers, Chery Automobile Co has managed to raise 5.4 billion yuan ($863.63 million) by selling stakes to a string of private equity (PE) investors across the country since 2007.

It was Chery's pledge to eventually go public that long motivated PE investors to pour their money into the company. Yet, the news that Chery reported losses for the first time in the first half of this year has stymied the automaker's plan for an initial public offering (IPO), much to the disappointment of the many investors who expected lucrative returns from an eventual public float but are now left with their funds locked up in the company.

Despite the high profits successful IPOs can bring, PE investors need to recognize the risks associated with the way they do business. If a company's IPO plan fails, it is always difficult for PE investors to find a reliable exit strategy for their funds.

The author is Zhou Junsheng, a commentator.