IPOs: NY Says Bye-Bye to iDreamsky, HK Welcomes Legend
Bottom line: The see-saw performance of iDreamSky shares after its buyout offer reflects a growing number of speculators in the market for US-listed China shares, while Legend’s Hong Kong IPO is likely to price and debut weakly.
As we head into the end of June, the first half of 2015 is set to set an unusual record of becoming the first such period to see a negative number of New York IPOs by Chinese companies. That fact is being driven by a record number of companies that have announced privatization plans, including the latest by mobile game developer iDreamSky (Nasdaq: DSKY). If this latest plan is successful, iDreamSky would also set a new record for shortest time ever as a New York-listed Chinese firm, since the company only made its IPO last August.
Meantime, one actual IPO that is moving forward is coming in Hong Kong, where Legend Holdings, parent of PC giant Lenovo (HKEx: 992), has set a price range, date and chosen a ticker for its offering. This particular deal appears to be getting a ho-hum reception in Hong Kong, as most investors remain fixated on a rally across the Chinese border that has seen China’s domestic stock markets more than double over the last year.
We’ll begin with iDreamSky, which has become the first New York-listed company to announce a privatization plan this week, following a breakneck series of announcements that saw 5 companies disclose buyout offers last week. (previous post) According to iDreamSky, a company management-led group has offered to buy all of its American Depositary Shares (ADSs) for $14 each. (company announcement)
That price represented a modest 5 percent premium from iDreamSky’s close last Thursday. The price was actually lower than the company’s Friday close of $14.56, indicating that rumors of the buyout were probably in the market by then. Following the actual announcement, the shares tumbled nearly 10 percent to $13.13, in a strange see-saw that reflects lots of speculators are in the market trying to make some fast money by betting on who will privatize next.
iDreamSky priced its IPO shares at $15 apiece last August, as it made a listing at the height of a flood of New York offerings that culminated a month later with the record-breaking $25 billion IPO by e-commerce leader Alibaba (NYSE: BABA). So far the only other company from that wave to announce a de-listing plan is another mobile game firm, Sungy Mobile (Nasdaq: GOMO), which made its IPO at the end of 2013 and announced a privatization plan in April. (previous post)
Next let’s look at Legend, which has said it will launch its IPO on June 29 and trade under the Hong Kong ticker number 3396. (Chinese article) The company has set a price range for its shares of HK$39.80 to HK$43, which would allow it to raise up to HK$15.1 billion, or about $1.9 billion, if its shares price at the top of their range. That would be close to its most recent fund-raising target of about $2 billion, but it’s still sharply lower than an original target of up to $3 billion.
I have mixed feelings about this particular IPO, mostly because Legend is a highly diversified company whose assets include everything from its 31 percent stake in Lenovo, to holdings in real estate, chemicals and 2 private equity funds. It’s often hard to value such a diversified company, and prospects don’t look particularly promising for its core Lenovo holding due to an uncertain future in the PC business.
Legend shares will also have limited attraction because many investors are more likely to chase a slew of new IPOs on China’s 2 main domestic stock markets to capitalize on the ongoing rally there. All that said, I don’t hold out too much hope for Legend’s shares in their upcoming IPO, and would expect them to price in the lower half of their range and debut weakly when trading begins at the end of the month.
Related posts:
