Bottom line: The offshore market for Chinese IPOs will see a brief resurgence in the next month as China’s stock markets stabilize, but the window will be short-lived as China’s economy shows new signs slowing sharply.
Imax China jumps in HK debut
After an extended period with few new listings, a new wave of IPOs by Chinese firms in offshore markets could be coming, led by stodgy insurer China RE. Sources are saying the re-insurer has taken a major step forward in its creaky IPO process by setting a price range for its stock after receiving strong feedback from investors.
This particular deal has been in the works for the last month, but it’s still relatively encouraging to see that it’s moving closer to the end. But the fact that it comes in the conservative and unexciting insurance sector means we’ll probably have to wait for a more controversial offering to see if the fall IPO season will really take off. Such a riskier deal could come in the next week or so if we see renewed activity for the other major offering in the pipeline, a $1 billion IPO by faded investment banking superstar CICC. Read Full Post…
Bottom line: Beijing should wean big state-run banks off government hand-outs to force them to lend more responsibly, and should even consider allowing one or two failures to make its point.
3 banks seek public, private money
Three mid-sized Chinese banks were in the fund-raising headlines last week, reflecting the difficult times many now face as they struggle with growing volumes of bad debt due to China’s slowing economy. The trio, Postal Savings Bank of China, Everbright Bank (HKEx: 6818) and Huishang Bank, were aiming to raise a massive $10 billion collectively to bolster their balance sheets, each by taking in new investors.
But their target investors were quite different. Postal Savings Bank and Huishang both chose to court the private sector through share offerings to big institutional buyers. By comparison, Everbright chose to seek funds from its state-run parent. Read Full Post…
Bottom line: Guahao’s new mega-funding spotlights big growth possibilities for private medical service providers, while Hertz could continue to sell down its stake in Car Inc as China’s auto market slows.
Guahao finds riches in medical booking app
IPOs may have ground to a halt due to China’s recent market volatility, but that hasn’t stopped a steady flow of buying and selling into high-growth companies by big investors looking for the next hot trend. One such operator of a medical services app looks like the latest flavor of the day, with reports that a company called Guahao has just landed nearly $400 million in new funding. Meantime, leading rental car operator Car Inc (HKEx: 699) moved in the opposite direction, losing some momentum after early strategic investor Hertz (NYSE: HTZ) sold down more of its stake in the company.
Both of these deals are part of the natural ebb and flow of funds into and out of Chinese companies, and are often a good pointer of where the next trends might emerge. App developers have become a hot investment area, and private medical service providers are also gaining momentum under China’s overhaul of its healthcare system. Meantime, the car market is moving in the other direction due to China’s slowing economy, which is probably making big global names like Hertz less bullish on the market. Read Full Post…
Bottom line:Alibaba’s stock is likely to face downward pressure through the end of the year, but could see a modest rally of up to 20 percent in 2016 as speculators pile out and founder Jack Ma enters a period of relative silence.
Jack Ma heading for hibernation after bearish year?
Many are taking advantage of the one-year anniversary of Alibaba’s (NYSE: BABA) record-breaking IPO to reflect on the past 12 months and what the future might hold for the company, especially for its stock that has gone on a roller coaster ride in that period. Many are quite subdued and even bearish on the stock, citing bad investments and a slowing Chinese economy. But I would actually take a contrarian view and say the shares could be poised for a modest rebound next year after China’s stock markets settle from their current turbulence.
My theory is rather simple. Alibaba’s stock became the plaything of speculators in the first year of trading after its $25 billion New York IPO last September became the biggest offering of all time. First it was the bulls who piled in, buying into the hype that Alibaba happily dished out about the explosive growth potential of China’s e-commerce market. More lately the bears have moved in, seizing on slowing growth, questionable investments and a piracy scandal to make some short-selling profits on the overvalued stock. Read Full Post…
Bottom line: Recent moves by Baidu, SouFun and 7 Days reflect frustration by Chinese companies at lack of understanding by western stock buyers, but also spotlight the need for these companies to better educate investors about their stories.
Better investor education needed from Chinese companies
A trio of headlines last week highlighted the growing financial alternatives for high-growth Chinese companies that have lately felt unappreciated by global stock buyers. The news was quite varied, led by a threat from online search leader Baidu (Nasdaq: BIDU) to privatize its shares from New York, and a large new investment by 2 major private equity firms in online real estate services giant SouFun (NYSE: SFUN). Meantime, the formerly New York-listed 7 Days hotel chain was in headlines as it sold itself to Shanghai’s Jin Jiang International (HKEx: 2006; Shanghai: 600754).
Each of these stories is quite different, but all reflect a growing arsenal of tools that high-growth private Chinese companies have to boost their profiles and valuations as they become more skilled at playing in global financial markets. At a more fundamental level, each of these moves also represents a form of education for investors, which is critical to helping outsiders understand a group of companies from China’s vibrant but still largely unknown private sector. Read Full Post…
Bottom line: New Hong Kong IPOs by CICC and China Re are likely to move ahead and receive solid but not extremely strong demand, though a resumption of new listings in China might not occur until early next year.
New listings set to resume in HK
New signs are emerging of an upcoming resumption for China company IPOs, which have come to a standstill these last few months due to huge stock market volatility. The latest signs of new life are coming from 2 major financial services firms, with investment bank CICC and insurance giant China Re reportedly set to meet securities officials in Hong Kong this week. Both companies filed for Hong Kong listings earlier in the summer, but later went quiet as investor appetite for new shares was quashed by huge volatility on Chinese and Hong Kong stock markets.
This latest activity comes just a week after we saw similar signs of life in both Hong Kong and China. One of those saw outdoor advertising specialist Focus Media take steps for a backdoor listing in Shenzhen, while the other saw snack food giant Liwayway also take initial steps for a Hong Kong listing in the next 6 months. The activity led me to call on China’s securities regulator to quickly lift its current temporary ban on new IPOs as soon as the current market volatility subsides. (previous post) Read Full Post…
Bottom line: Intensifying competition in dining-related O2O services is pressuring Meituan to raise more funds, and the company should seriously consider a strategic alliance with Alibaba.
O2O dining wars dog Meituan
Online-to-offline (O2O) services have become the flavor of the day on China’s Internet, and take-out dining has emerged at the epicenter of a stampede by all 3 of China’s leading Internet companies to develop the market. Over the last 2 years, leading search company Baidu (Nasdaq: BIDU), e-commerce leader Alibaba (NYSE: BABA) and social networking giant Tencent (HKEx: 700) have all launched major initiatives in the space, collectively pouring hundreds of millions of dollars into the area.
Against that backdrop, the independent Meituan is emerging as an orphan in the space, since it’s the only player without a major backer despite its status as China’s top group buying site. That could explain the latest reports that say Meituan has returned to financial markets and is in the process of raising up to $2 billion in new funds, less than a year after it raised $700 million in another massive cash-raising exercise. Read Full Post…
Bottom line: Mindray is likely to finally privatize following its announcement of a new, lowered offer price, kicking off a new round of revised bids for some of the other Chinese companies that received similar offers earlier this year.
Mindray lowers buyout offer price
In a move that didn’t get investors too excited, medical device maker Mindray (NYSE: MR) announced that a group aiming to privatize the company has lowered its earlier offer price to reflect recent declines in the company stock. Shareholders greeted the news by dumping Mindray stock, which ended the latest session at $23.60, or 13 percent below the revised offer price of $27 per American Depositary Share (ADS).
Frankly speaking, I’m quite impressed that this deal is moving forward at all, since I fully expect most of the 3 dozen similar privatization bids announced earlier this year to ultimately collapse. Mindray is the first of the huge field of buyout candidates to update investors on the status of its bid since shares of US-listed Chinese companies began to tank in sync with a much louder sell-off on China’s domestic stock markets in June. Read Full Post…
Bottom line: Major new funding raising by Uber, its Chinese equivalent, and Alibaba’s logistics arm reflect continued interest in such leading Internet firms by major global Investors, though funding will slow sharply for smaller, less known players.
Three new Internet deals raise $5 bln
It seems my earlier forecast was incorrect that major fund-raising for Chinese Internet companies could be cooling due to waning investor sentiment during the recent market volatility. The latest headlines include 3 major new deal close to completion, worth a collective $5 billion. The largest has Didi Kuaidi, the homegrown Chinese equivalent of private car services giant Uber, on the cusp of new a funding deal worth $3 billion. The second has the actual Uber also near a deal to raise $1.2 billion for its Chinese business, as it prepares to spin off the unit into a separate company.
Meantime, the smallest of the deals has e-commerce leader Alibaba ‘s(NYSE: BABA) Cainiao logistics unit also on the verge of a deal to provide hundreds of millions of yuan for a small logistics company. In this case the move appears aimed at helping Cainiao to build up its stable of partners providing logistics service. The addition of such outsiders would also help to validate Alibaba’s 2-year-old program to plow 100 billion yuan into its logistics capabilities.
Bottom line: The securities regulator should start signaling it will end its latest IPO freeze as soon as current market volatility subsides to demonstrate China’s commitment to capital market liberalization.
CSRC should signal IPO ban to end soon
Reports of 2 new listing plans by Chinese companies were in the headlines last week, showing executives hope to resume their fund-raising using capital markets once the current market volatility ends. One headline saw outdoor advertising specialist Focus Media disclose a new plan to list via a backdoor offering in Shenzhen, while the other saw media report that snack giant Liwayway Holdings was taking initial steps for a $200 million IPO in Hong Kong.
Stock market fund-raising by Chinese companies has come to a standstill over the last 2 months, after a rout that began in June frightened off investors and prompted the China Securities Regulatory Commission (CSRC) to suspend all new offerings in a bid to stabilize the situation. This resumption of offering activity is still in the very early stages, and reflects the important role that financial markets play for companies in need of capital to fund their operations. Read Full Post…
Bottom line: Focus Media’s latest backdoor listing plan could stand a 50-50 chance of success, and should come as a warning of the difficulties that may face many other US-listed Chinese firms hoping to privatize and re-list in China.
Focus Media in new backdoor listing plan
You have to admire the persistence of Focus Media, the outdoor advertising specialist that’s trying to blaze a new homecoming trail for US-listed Chinese firms trying to privatize and re-list in China to get higher valuations. More than 2 years after leaving the Nasdaq and one failed re-listing attempt in Shenzhen, Focus is trying again with a new plan for a backdoor listing via a Shenzhen-listed shell company called Hedy Holdings (Shenzhen: 002027).
I’m actually being just slightly facetious in admiring Focus for its persistence, since it really has very few other options in this case. Big investors including US private equity giant Carlyle put up billions of dollars to help Focus de-list in 2013, and now they’re simply looking to recoup their investments and hopefully make some profits by re-listing the company at a higher valuation in China. Read Full Post…
