FRONT STORY US
US bankers ready for big second half
Bigger names and more tech/biotech IPOs on the cards
Bankers see no slowing in the pace of US IPO
activity in the second half as strong
aftermarket performance and solid investor
demand encourage issuers to bring forward
their listing plans.
ECM syndicate desks just ruled off a
ROBUSTûlRSTûHALFûTHATûSAWû53û)0/ûPROCEEDSû
jump 24% to US$25.8bn and the number of
pricings surge 30.4% to 90, the latter the
best half for new-issue pricings since 2015.
Senior US ECM bankers are forecasting
more of the same, notwithstanding the
prospect that US mid-term elections in
November will unsettle investors.
“It feels like some of the more well-known
companies that people have been waiting for
will come in the back half of this year, which is a
good sign for the overall health of the market,”
said Jim Cooney, Bank of America Merrill
Lynch’s head of Americas ECM. “Some of them
will likely price at very good valuations.”
Sectors such as healthcare and technology are
leading the IPO charge, even as traditional active
sectors such as energy and real estate have
slowed. Biotech/life sciences deals comprised
about half of IPOs in the second quarter alone.
The pipeline of sponsor-backed deals -
which have been some of this year’s most
disappointing IPOs - is relatively light, in part
as investors shy away from highly leveraged
companies as interest rates continue to rise.
“In terms of what we can see in the IPO
backlog and deals we are pitching, I’d suggest
the easiest thing to say is that it will be more of
the same, which is a lot of tech and biotech,”
said Brian Reilly, Barclays’ global head of ECM.BIG RETURNS
The 25%-plus average aftermarket return
from the 2018 class of IPOs, all the more
ROBUSTûINûAûmATûBROADERûEQUITYûMARKET ûHASû
left investors hungry for more.
“Based on current market sentiment, market
valuations and the amount of liquidity in the
US equity market, plus the outperformance of
the IPO product relative to the inconsistent
performance of the overall market, IPOs are
going to run at a very high pace,” said Cooney,
WHOSEûlRMûLEADSûTHEû53û)0/ûLEAGUEûTABLESûATû
the half-way mark.
In addition to a continued wave of biotech
IPOs, sponsor-backed commercial real estate
agency CUSHMAN & WAKEFIELD ûlNANCIALû
ADVISORYûlRMûFOCUS FINANCIAL PARTNERS and
OILlELDûEQUIPMENTûMAKERûAFG are queuing
up IPOs for likely pricing in July.
Looking further into the second half, a US
IPO of China music streaming service
Tencent Music could rank as the year’s
biggest IPO, while anticipation is also
building for a potential IPO of GE Healthcare
early next year.Sonos, the consumer electronics
company, added its name to the queue on
&RIDAYûBYûlLINGûDOCUMENTSûFORûITSû)0/û!NDû
SurveyMonkey, an online survey provider, is
expected to bring its offering, currently in
CONlDENTIALûREGISTRATION
But large unicorn IPOs such as Uber and
Airbnb remain off the agenda this year.
Bankers say there is a large pipeline of energy-
related IPOs looking to price in the second half- but with the inverted oil price curve keeping
energy investors wary, most of these are
expected to wait until better conditions.
Overall US equity and equity-related volumes
(IPOs, secondaries, blocks and converts) rose 7.6%
YEAR
ON
YEARûTOû53BNûINûTHEûlRSTûHALF û
though the number of deals fell 12.1% to 326,
according to Thomson Reuters data.
The two biggest ECM deals (US$3bn-plus)
were HNA’s US$4.8bn secondary sell-down
of Hilton Worldwide in April and the
US$3.2bn IPO of AXA Equitable in May.
Across all US ECM products, technology
accounted for a 21.7% share of proceeds,
followed by healthcare with 16%.
US ECM numbers disguise some weakness in
the block/risk business, where volumes fell 9.8%
to US$29.6bn (but still 38% of total secondary
volumes) and the number of deals was down
ûTOûûAMIDûSOMEûDIFlCULTûTRADES
Anthony Hughes
Shandong Ruyi takes advantage
of SMCP share rise
Chinese clothing group raises €165m from equity and EB combo
Chinese textiles and clothing group
Shandong Ruyi took advantage of shares in
luxury fashion brand SMCPûlNALLYûTRADINGû
above last October’s IPO price to monetise
part of its stake on Thursday evening.
JP Morgan was sole bookrunner on a €105m
equity placing in SMCP and the company’s €60m
July 7 2019 exchangeable bond, with proceeds
for general corporate purposes.
Investors were wall-crossed on Thursday
regarding both transactions, allowing for the
equity placing to launch at 5pm in London with
indicative orders for approximately 70% of the
4.69m shares on offer. A covered message
followed after 40 minutes and the books closed
at around 7:30pm with pricing set at €22.25, an
8% discount to the €24.19 close.
The offering represented approximately 6%
of share capital and a chunky 80 days’ trading.
The stock closed on debut at €21 versus €22
pricing and did not move above that level until
late May, reaching a closing high of €24.85 in
mid-June. With the summer break approaching
and markets quiet because of the US
Independence Day holiday, a banker involved
noted that although this was an opportunistictrade, “it wasn’t the perfect week to maximise
pricing, but it was a good outcome”.
4HEûBOOKûWASûCONCENTRATED ûWITHûTHEûTOPûlVEû
orders taking about 60% of the trade, including
two that were wall-crossed and a large long-only
order from an account that was not wall-crossed.
The €22.25 pricing provided the reference
price for a concurrent exchangeable bond
with a maturity of July 7 2019 and a coupon
and premium range of 3.5%-4% and 10%-15%
respectively. The bonds launched with a base
deal size of €50m and provision for a €10m
upsizing that was eventually exercised and
over-collateralisation of 250%, guaranteed by
Shandong Ruyi subsidiary Forever Winner
International Development.
Pricing was set at a 4% coupon with a 10%
premium.
Shandong Ruyi retains a 51.3% stake subject
to a six-month lock-up.
Robert VenesEQUITIES
China 72 Hong Kong 75 India 75 Japan 76 Philippines 76 Belgium 76 Germany 77
Norway 77 Romania 77 Sweden 78 UK 78 United States 80