News
HK protests put IPOs in doubt
Equities Alibaba waits while others will have to compromise on valuationPolitical unrest has cast doubts
over stock market listings for
the foreseeable future in Hong
Kong, including the secondary
listing of up to US$15bn from
Chinese e-commerce giant
ALIBABA GROUP.
Alibaba has never committed
to a firm timetable since
filing confidentially in June,
but earlier expectations had
centred around a launch soon
after it reported its earnings on
August 15. A person familiar
with the situation, however,
said it was unclear when the
deal would happen and ruled
out any such move this month.
“When the deal will come
depends entirely on the
development of the Hong Kong
protests and the US-China trade
dispute,” said the person.
Pro-establishment lawmaker
Michael Tien Puk-sun said
last Tuesday the Chinese
government has set October
1, the 70th anniversary of
the founding of the People’s
Republic of China, as the
deadline to calm the situation
in Hong Kong.
Bankers are hoping that the
Hong Kong government will
find a way to end the protests
in the next few weeks.
“This is the most ideal
situation. No high-profile
Chinese companies would want
to launch a mega offering in
Hong Kong when the city is in
a tense relationship with the
Chinese government,” said
another person with knowledge
of the matter. “Alibaba is in
no rush to raise funds so it
can wait until the condition is
right.”
Alibaba’s Hong Kong listing
plan surfaced as the US-China
trade conflict was escalating,
sparking speculation that the
main aim of the move is to
decrease Alibaba’s dependence
on the US capital market.
“We have always seen this(listing in Hong Kong) as a
political decision. Alibaba can
easily raise the same amount
of money from a follow-on
in the US given its huge daily
turnover,” said a banker away
from the deal.
The 30-day average daily
trading volume of Alibaba
was 18.9m shares, according
to Refinitiv data, equal to
US$3.25bn at Thursday’s
US$171.91 closing price.
The stock has risen 25% so
far this year, outperforming the
12.5% gain for the Dow Jones
Industrial Average.
Given that Alibaba’s main
motive is not financial, some
bankers worry that Hong
Kong could still lose out to an
alternative venue.
“If Hong Kong’s situation
deteriorates further, there’s a
chance it may not even list in
the city. Don’t forget they have
explored a domestic listing
before,” said the banker away
from the deal.
Alibaba worked with CICC
and CLSA last year to explore
an issue of Chinese depositary
receipts, though the deal did
not materialise.CICC and Credit Suisse
are arranging the planned
secondary listing in Hong Kong.LOWER VALUATIONS
While Alibaba waits, other
issuers are still planning to
push their deals ahead if
market conditions allow.
Fosun-backed SHANGHAI HENLIUS
BIOTECH plans to start pre-
marketing this week for a Hong
Kong IPO of about US$500m,
which will be the first sizable
test of investor appetite after
weeks of protests.
“We can get a sense first on
what valuation investors are
willing to pay for the IPO from
pre-marketing. The company
hasn’t decided when to open
books for the deal as yet,” said a
person close to the transaction.
At least five other companies
are planning to seek listing
approval as early as September
for Hong Kong IPOs of a
combined US$4.5bn. They are
TOPSPORTS (US$1bn), JS GLOBAL
LIFESTYLE (US$800m), HOME CREDIT
(US$1.5bn), CHINA FEIHE (US$1bn)
and SINOMAB (US$200m).
The five are planning to start
pre-marketing once they winapproval if market conditions
allow, said people close to the
deals.
“It is impossible to say there
are no worries about the IPO
in Hong Kong,” said a person
close to the Home Credit deal,
referring to the Sino-US trade
war and the unrest in Hong
Kong.
“So far, the deal is still on
track for September or October.
Investors generally have
positive feedback towards the
company as a regulated player
in the consumer finance field,”
the person said.
Despite the volatile
backdrop, bankers on the deals
said the issuers will go ahead to
pre-market the transactions to
gauge investors’ interest.
“Investors are not totally
turning away from Hong Kong
deals yet. But with the protests
going on, we have to try extra
hard to convince international
investors Hong Kong is still a
safe place to invest,” said one of
the bankers.
“It’s really hard to tell
whether markets will get
worse in the next few months.
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