IPOs: Autohome Zooms In NY, Everbright Banks On HK
The IPO world is humming with activity as we head into what’s likely to be the final week of new listings this year, with web firm Autohome gaining some momentum in New York as China Everbright Bank struggles to find an audience in Hong Kong. In another smaller offering in Hong Kong, a death care services firm called Fu Shou Yuan International is attracting some big-name investors in the run-up to its offering, shining a spotlight on the big potential for such services in China.
This flurry of activity comes in what will go down as a lukewarm year for offshore IPOs by Chinese firms. The market in New York was dead for most of the year, as investors remained skeptical of Chinese accounting practices. But a flurry of successful listings in the last 2 months are showing some appetite has returned to the market after a 2 year lull. Meantime, Hong Kong has also been sluggish for most of the year due to the weak Chinese economy. Most activity has come from capital-starved mainland firms that are turning to Hong Kong due to a yearlong freeze on new IPOs in China.
Let’s start off our year-end IPO wrap with Autohome, a website offering car-related information and services, which has raised the price range for its offering after getting unexpectedly strong reception for its American Depositary Shares (ADSs). Autohome had originally aimed to raise up to $120 million, but then lowered the target to $100 million after initial reception was cool. (previous post)
Now the company has raised its original price range of $12-$14 to a new range of $14-$16, meaning it could raise slightly more than its original target of $120 million. (English article) This unusual turnaround comes after other recent Chinese IPOs in New York have experienced similarly bumpy roads, though all now trade well above their final IPO prices. I would look for Autohome shares to price in the middle of their range, and then post some strong gains in their debut on big volume. But like the others to list in the last 2 months, I would expect its shares to give back much of their initial gains in the first half of 2014, as speculators lose interest in these companies.
Next let’s look quickly at Everbright, whose share sale looks like it will finally go forward after 2 aborted past IPO attempts. The company ultimately raised $2.8 billion in its offering this time, with its shares set to debut on Tuesday. (English article) The funds raised are considerably smaller than the $6 billion Everbright hoped to raise the first time it filed for a Hong Kong IPO in 2011.
Everbright is just one of several mainland lenders now listing in Hong Kong, as all seek to bolster their weakening balance sheets weighed down by mounting bad loans made during China’s massive economic stimulus plan during the global financial crisis. Given the weak performances by recently listed Huishang Bank (HKEx: 3698) and Bank of Chongqing (HKEx: 1963), I wouldn’t expect Everbright’s listing to perform any better and don’t see any upside potential for its shares in the next few months.
Finally let’s look at Fu Shou Yuan International, which is raising $215 million with its own Hong Kong IPO. This particular offering isn’t that large for a non-tech company, but is drawing attention because it has attracted 3 major investors, including private equity giant Carlyle, which are collectively buying about one-fifth of the new shares. (English article) That vote of confidence is understandable, since death-care is certainly an industry in China with big growth potential and few major players in the market. Accordingly, I would expect Fu Shou’s shares to do well on their debut, and for the stock to be a strong performer in 2014.
Bottom line: Autohome and Fu Shou shares should debut strongly in New York and Hong Kong, while Everbright Bank’s shares are likely to sputter in their Hong Kong listing debut.
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