IPOs: Wanda Sags, Inches Into Australia; Linekong Lines Up
Bottom line: Shares of BAIC and Dalian Wanda will be flat over the next few months after weak trading debuts, while Linekong shares will open down 5-10 percent if they debut before year-end.
The year-end flurry of IPOs happening in Hong Kong is sputtering, with the 2 biggest offerings by shopping mall operator Dalian Wanda (HKEx: 3699) and car maker BAIC Motor (HKEx: 1958) both making weak trading debuts. That doesn’t bode too well for one of the year’s final remaining IPOs for Linekong, since other companies from the highly competitive video gaming sector haven’t done very well in their similar recent listings in Hong Kong.
In many ways, this disappointing series of year-end debuts reflects the fact that Hong Kong is struggling to compete with New York to attract the sexiest Chinese companies. Most of this year’s new Chinese Internet listings have gone to New York and done quite well, culminating with the record-breaking $25 billion IPO by e-commerce giant Alibaba (NYSE: BABA) in September. By comparison, less sexy companies in more mature, older industries have gone to Hong Kong.
One of those is Dalian Wanda, whose shares sagged in their debut this week to close down 2.6 percent on their first trading day. (English article) Despite being one of China’s largest and best run commercial real estate companies, Dalian Wanda has faced an uphill road throughout its listing process due to a weakening Chinese economy that has cast a chill over all real estate stocks.
Dalian Wanda had to cut the size of its offering due to weak demand, and ultimately raised $3.7 billion — far less than the $6 billion it originally targeted. It sold shares for HK$48 apiece, near the high end of its range. But the stock stumbled out of the gate, and closed down at HK$46.75 on its first trading day. I doubt we’ll see the stock move much in the final week of 2014, though I do think it looks like a good longer-term buy over the next 2-4 years.
Before moving on, we should make quick mention of another Wanda-related deal in the headlines today, which comes with word that an investor related to the company has purchased Australia’s second largest theater chain. That deal has seen Hoyts Group, which operates 43 cinemas, sold to Chinese billionaire Sun Xishuang for a price that observers said was probably about $730 million. (English article)
Sun is is the second largest shareholder in Dalian Wanda, with a 6.3 percent stake. He’s also a major shareholder in the company’s Wanda Cinemas subsidiary. It’s a bit unclear what Sun’s intentions are, but some are speculating he could ultimately sell Hoyts to Wanda, which owns one of China’s largest cinema chains and also made headlines 2 years ago with its purchase of AMC Entertainment (NYSE: AMC), the second largest US cinema operator. Dalian Wanda’s parent, Wanda Group, is also in the process of making an IPO in China for its theater chain operations, Wanda Cinema Line. (previous post)
We’ll close out this late-year IPO wrap with BAIC’s recent trading debut and Linekong’s upcoming launch. BAIC became one of China’s last major state-run automakers to list when it raised $1.4 billion and priced its shares at HK$8.90, in the middle of their range. (English article) The stock opened flat in its trading debut last Friday, and has basically remained flat since then. That isn’t a huge surprise, since the company is one of the least exciting in China’s auto sector, which is slowing sharply as the nation’s economy cools.
Finally there’s the Linekong IPO, which has moved ahead at a glacial pace due to weak demand and has now been pushed back one more time. Under the latest plan, the stock is scheduled to debut on December 30, more than a week later than a previous date of December 19. (Chinese article) This particular offer is likely to open weakly and will probably fall on its debut due to stiff competition and poor sentiment towards companies in the fiercely competitive gaming sector.
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