10 International Financing Review April 4 2020Top news
Follow-ons gather pace in Asia
Equities Nine deals raise about US$2.8bn over the past weekBY CANDY CHAN, FIONA LAUFollow-on offerings in Asia-
0ACIlCûSURGEDûTOûABOUTû53BNû
last week as companies and
major shareholders tapped the
markets for funds to withstand
the coronavirus crisis.
After a month of extreme sell-
offs, Asian markets regained some
stability, with Australia’s S&P/ASX
200 closing the week 4.65% higher
while both Hong Kong’s Hang
Seng index and South Korea’s SE
Kospi 200 slid a modest 0.9%.
Riding the better conditions,
nine companies or their
shareholders rushed to raise funds.
More than half of the deals were
from Australasia, where
Wesfarmers completed the biggest
deal of the week with a A$1.07bn
(US$651m) block trade in
supermarkets operator COLES GROUP.
New Zealand specialist outdoor
gear retailer KATHMANDU HOLDINGS,
Australian online travel agencyWEBJET, student placement and
TESTINGûlRMûIDP EDUCATION, and data
centre operator NEXTDC also
launched respective placements
and/or entitlement offers of
NZ$207m (US$123m), A$346m,
A$225m and A$672m respectively.
In South Korea, Singapore’s
sovereign wealth fund Temasek
Holdings raised a combined
W619bn (US$504m) from blocks
in drugmaker CELLTRION and its
AFlLIATEûCELLTRION HEALTHCARE.
In Hong Kong, the parent
company of WUXI BIOLOGICS (CAYMAN)
raised HK$4.6bn (US$599m) from
a sell-down and GEM-listed Viva
China raised HK$1.5bn from a
block in Chinese sportswear
company LI NING.
The deals highlight the depth
of liquidity available for follow-
ons in the region but bankers
generally believe that the market
has yet to reopen fully and see
little demand for growth capital.
“I think the vast majority willbe primary issuance, which is
balance sheet-related. The
secondary sales will tend to be
those that are in distress either
because of margin against the
security, or the entity at stake is
in need of cash,” said Aaron Arth,
HEADûOFûTHEûlNANCINGûGROUPûFORû
Asia ex-Japan at Goldman Sachs.SUPERMARKET SALE
Wesfarmers was certainly looking
to shore up its balance sheet at a
DIFlCULTûTIMEû4HEû!USTRALIANû
conglomerate launched the Coles
sale after Monday’s close, riding on
a 6.9% jump in the stock and a 7%
surge in the local S&P ASX 200
index. It had already raised
A$1.05bn from a sell-down in Coles
on February 18, but had made a
point at the time of keeping a stake
of more than 10% to maintain the
right to nominate a director.
Rob Scott, Wesfarmers
managing director, said the
SIGNIlCANTûANDûUNPRECEDENTEDûevents of the past few weeks had
highlighted the importance of
BALANCE
SHEETûmEXIBILITY
“This divestment crystallises an
attractive return for shareholders
since the demerger and further
enhances Wesfarmers’ strong
balance-sheet position,” he said.
Coles shares have fared better
than the broader market as
stockpiling of necessities and
increased consumption of food at
home underscore the defensive
quality of supermarket operators.
The stock fell 4.3% from
February 1 to March 31 while
the S&P ASX 200 index plunged
28% over the same period.
Sell-downs in Li Ning, WuXi
Biologics and the Celltrion duo
were similar stories as investors
sought defensive stocks.
“The blocks were all from the
healthcare and retail sectors.
Investors believe these stocks
can weather the storm better
while shareholders are grabbingCoffee spill hits ECM pipeline
Equities/Emerging Markets Luckin Coffee scandal adds to US mistrust of Chinese issuersBY FIONA LAU, CAROL CHANA brewing accounting scandal at
China’s LUCKIN COFFEE has emerged
as the latest threat to the pipeline
of Chinese listings in an
increasingly hostile US market.
Luckin, listed on the Nasdaq
less than a year ago, lost 80% of
its value on Thursday after it said
an internal probe found that its
CHIEFûOPERATINGûOFlCERûANDûOTHERû
employees had fabricated sales
totalling Rmb2.2bn (US$310m)
INûTHEûlNALûNINEûMONTHSûOFû
Seen as China’s answer to
Starbucks, Luckin’s technology-
enabled model and rapid growth
had made it an investor favourite
since its US$645m IPO in May
2019, with the stock surging from
a US$17 IPO price to an all-time
high of US$51.38 on January 17.
The accounting scandal,
however, will put other Chinese
issuers under suspicion at a timeof heightened tensions between
the US and China. US President
$ONALDû4RUMPûLASTûYEARûmOATEDû
the idea of banning Chinese
companies from the US stock
market, part of a long-running
dispute over audit accountability.
“This reminds me a little of
what went on after a series of
accounting and corporate
governance scandals of US-listed
Chinese companies in 2011.
Chinese IPO activity in the US
almost came to a halt in the next
two years,” said one ECM banker.
Share prices of US-listed Chinese
companies tumbled in 2011 amid
concerns about the sustainability
of China’s growth and allegations
of accounting fraud at overseas-
listed Chinese companies.
Sino-Forest, for example, collapsed
in 2011 after short seller Muddy
Waters accused the company of
being a Ponzi scheme.
“Trump won’t let it go. It’sanother opportunity to attack
China,” said another banker.
“China-US listings are already slow
amid the coronavirus outbreak.
This will unavoidably dent
INVESTORSûCONlDENCEûANDûSOMEû
companies may now consider
listing in Hong Kong instead.”
Planned sizeable China-to-US
listings this year include the
53MnMûmOATûOFûONLINEû
GROCERYûANDûDELIVERYûlRMûDADA
GROUP and the US$500m–$1bn
offering each from budget store
chain MINISO ûmEXIBLEûDISPLAYû
maker ROYOLE and online audio
platform XIMALAYA FM.
In January, Luckin and its
shareholders raised US$580m
from a follow-on and the
company also raised US$460m
from a convertible bond. Credit
Suisse, Morgan Stanley, CICC
and Haitong International
arranged both the 2019 IPO and
the January fundraising.At Thursday’s close of
US$6.40, investors who bought
at the January placement price
of US$42 a share are down 85%.
“Any time you have fraud you
just have to get out,” one New
York-based ECM banker said. “The
analysts have to put their estimates
on hold and the underwriters will
have a lawsuit on their hands.”CAR CRASH
CAR INC‘s shares and bonds slumped
on Friday after Luckin’s
announcement. CAR and Luckin
are separate companies in entirely
different industries, but the
market sees the two as related
given that both are controlled by
Lu Zhengyao. CAR operates a car
rentals and used car sales business.
Its Hong Kong-listed shares
were suspended at 10:14am
Hong Kong time pending a
CLARIlCATIONûANNOUNCEMENTû
after they plunged as much as4 IFR Top news 2327 .p 2 - 12 .indd 10 03 / 04 / 2020 19 : 29 : 30