International Financing Review March 7 2020 13For daily news stories
@ visit http://www.ifre.comBankers resigned to
quitting IPOs for lent
Equities Virtual meetings considered but delays likelyBY ROBERT VENESECM bankers in Europe are in
wait-and-watch mode
regarding the IPO pipeline,
but expectations are that most
nûIFûNOTûALLûnûPLANNEDûmOATSû
will be pushed back until after
the Easter break over
coronavirus-related market
carnage.
h9OUûWOULDûHAVEûTOûBEûCRAZYû
TOûLAUNCHûAûSINGLEûCOUNTRY û
mid-cap IPO right now,” said a
HEADûOFûSYNDICATEûATûAû53û
bank.
'OODû&RIDAYûFALLSûONû!PRILû
ûMEANINGûANYûDECISIONûONû
whether to press ahead with a
full four-week IPO process
pre-Easter needs to be taken
this week.
&RENCHûGAMINGûCOMPANYû
NACON curtailed roadshows to
JUSTûSEVENûDAYSûONûHEAVYû
demand and as the spread of
coronavirus caused stocks to
FALLûSHARPLY ûANDûOTHERSûCOULDû
follow that lead.
)NVESTECSûASSETû
management business NINETY
ONEûISûDUEûTOûlNISHû
bookbuilding on its IPO at the
end of this week. The book
WASûCOVEREDûAFTERûONEûDAYûANDû
roadshow meetings are taking
PLACEûASûPLANNEDû.INETYû/NEû
is a special case as it is a spin-
OFFûOFûJUSTûûOFûTHEûCOMPANY û
ANDûHASûANûORDERûFORûNEARLYû
half the deal from
management.
'ERMANûDATAûANALYTICSû
business EXASOL is targeting up
TOûõMûFROMûAû&RANKFURTû
mOATûWITHûBOOKBUILDINGûDUEûTOû
LAUNCHûEARLYûTHISûWEEK
h)TSûTOOûEARLYûTOûSAYûTHATû
bigger, more defensive and
GLOBALûBUSINESSESûDElNITELYû
CANTûGETûDONEûINûTHISûMARKET vû
SAIDûTHEûHEADûOFûSYNDICATEû(Eû
said that discounts might
need to be wider in order to
get deals done.
!ûSECONDûHEADûOFûSYNDICATEû
SAIDûCOMPANIESûHADûLEEWAYûONû
TIMINGûASûFULL
YEARûACCOUNTSûwould not go stale until mid-
-AY
A third banker said that it was
VERYûDIFlCULTûTOûADVISEûCLIENTSûATû
present on IPOs, knowing that it
would expose them to a month
OFûMARKETûRISKûh)TSûVERYûRAREû
THATûAûCOMPANYûHASûTOû)0/ûTHEYû
can wait,” he said.
The second head of
SYNDICATEûCOUNTEREDûTHATû
pressing ahead before Easter
might prove fortuitous, with a
less crowded window and the
potential that those who wait
are faced with an even
tougher market backdrop if
the situation regarding
CORONAVIRUSûWORSENSûh4HEû
EASIESTûTHINGûTOûSAYûISûWAIT ûBUTû
THATûMAYûNOTûBEûTHEûBESTû
approach,” he said.
A shift to teleconferencing
FORûANALYSTûMEETINGSûANDû
roadshows is being
considered.
h4HEûMARKETûAPPETITEûFORû
doing a roadshow face to face
ISûFAIRLYûLIMITEDûRIGHTûNOW vû
said the second head of
SYNDICATE ûRECOUNTINGû
investors wanting to know
where management had been
travelling, over contagion
fears.
Bankers in Europe are also
hesitant as there have been
ONLYûAûHANDFULûOFû)0/SûSOûFARû
THISûYEAR ûSOûTHEûSTRENGTHûOFû
DEMANDûWASûALREADYû
uncertain.
h7ITHûANû)0/ ûYOUûWANTûTHEû
best shot of achieving a fair
valuation and in a market like
this, does the incremental
headache of conference calls
and virtual roadshows give
YOUûAûFAIRûSHOT û)NûMANYûCASES û
)DûSAYûITûDOESNT vûSAIDûTHEû
third banker.
Bankers are at least keeping
BUSYûBYûBRINGINGûACCELERATEDû
deals in a few popular stocks,
such as an 11% sell-down in
TeamViewer, a provider of
remote working software,
WHICHûSURGEDûûINûFOURûDAYSû
AHEADûOFûTHEûõMûSALE h7EREûINûAûNEWûREGIMEûINû
the markets,” one banker
SAIDûh4HEûCONVERTûMARKETûISû
OPENûFORûBUSINESSû7ITHû
interest rates so low and
VOLATILITYûHIGH ûCONVERTSûAREûAû
GOODûOPPORTUNITYûFORû
investors.”
A week earlier, cloud-based
communications software
provider RINGCENTRAL raised
53BNûONûAûlVE
YEARû#"ûTHATû
printed with zero coupon and
50% premium to its share price
at the time.
Square, Enphase and
RingCentral all entered into a
derivatives transaction known
as a call spread to offset
economic stock dilution to
premiums in excess of 100% in
each case.
One side-effect of the call
SPREAD ûWHEREBYûTHEû
embedded call option is
repurchased and warrants are
sold at the higher strike, is
THATûCOUNTERPARTYûBANKSûBUYû
THEûUNDERLYINGûSTOCKûTOûHEDGEû
their risk.
RingCentral also used the
MONEYûITûRAISEDûTOû
SIMULTANEOUSLYûBUYûBACKûanother CB that was deep in the
MONEY ûRESULTINGûINûSHORT
COVERINGûOFûTHEûUNDERLYINGûBYû
bondholders.WIN/WIN
4HEûASYMMETRICûDOWNSIDE
UPSIDEûPROlLEûAREûAûBIGûREASONû
CBs appeal to fundamental,
LONG
ONLYûINVESTORS ûTHOUGHû
the pattern in 2020 of
outperformance both as
markets rise and fall is
unusual.
In the case of the Enphase
#" ûINVESTORSûDOWNSIDEû
exposure is limited to 20%
LOW
SûBONDûmOOR ûWITHûTHEû
ABILITYûTOûPARTICIPATEûINûûOFû
UPSIDEûTOûTHEûUNDERLYINGû
EQUITY ûBASEDûONû)&2û
calculations and credit/vol
INPUTSûPROVIDEDûBYûTHEû
underwriting banks.
h)NûTHEûPAST ûWEûHAVEû
seen renewed interest in
converts in later stages of
bull markets because of
THEIRûASYMMETRICûRETURNû
PROlLE vûSAIDû7YSOCKIûh7Eû
SAWûITûINûLATEûSûANDû)û
BELIEVEûYOUREûSEEINGûITû
now.” OFûûBEFOREûITSûSHARESûROSEû
ABOVEûTHEû2SûISSUEûPRICEû
4HEYûCLOSEDûATû2SûONû
4HURSDAY
A modest pop upon listing
could be problematic for high
net-worth investors, according
to a Mumbai-based stockbroker,
ASûlNANCEûCOMPANIESûHAVEûBEENû
LENDINGûATûRATESûOFûnûTOû
BUYûONûMARGIN ûAGAINSTûTHEû
usual 10%.
However, bankers working on
THEûTRANSACTIONûAREûCONlDENTû
that the shares will trade well.
h3")û#ARDSûWILLûBENElTûFROMû
the fact that it has no peers in
THEûLISTEDûSPACEûLOCALLYû)NVESTORSû
wanting exposure to the digital
ECONOMYûCANTûAFFORDûTOûSTAYû
AWAY vûANOTHERûBANKERûONûTHEû
deal said.
/THERû)0/SûMAYûNOTûFAREûSOû
well in the current climate.
A Rs2.06bn IPO from waste
PROCESSINGûCOMPANYûANTONY
WASTE HANDLING CELL was
subscribed just 12% on the
SECONDûDAYûOFûSUBSCRIPTIONûONû
4HURSDAYBooks were due to close on
&RIDAYûANDûITûWASûNOTûCLEARûATû
the time of writing if the
offer would be extended. A
person with knowledge of
the deal said orders were
LIKELYûTOûCOMEûINûONCEûTHEû
SBI Cards IPO was out of the
WAY
SBI Cards is the biggest Indian
IPO since General Insurance
#ORPûOFû)NDIASû2SBNûmOATûINû
û#OALû)NDIASû2SBNû)0/û
INûûISûTHEûCOUNTRYSûLARGESTû
to-date.
5PûTOûMûSHARESûAREûONû
OFFERûFORûAûûFREEûmOATûONû
LISTINGû/NLYûMûAREû
PRIMARYûSHARESû3TATEû"ANKûOFû
)NDIAûWILLûBEûSELLINGûMû
shares and CA Rover Holdings,
ANûAFlLIATEûOFû#ARLYLEû!SIA û
M
SBI Cards is a joint venture
between State Bank of India
ûANDûGLOBALûPRIVATEûEQUITYû
lRMû#ARLYLEû'ROUPû
Axis Bank, Bank of America,
HSBC, Kotak, Nomura and SBICapital are the lead managers. (^)
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