Gome founder cites sentiment for end of China Eagle offer
The founder of China's largest home appliance retailer Gome Appliance has scrapped his share offering in main-board-listed China Eagle Group after it was halved due to weak investor interest.
The decision to cancel the plan - to raise as much as HK$2.79 billion - came shortly after the deadline for Wong Kwong-yu's second proposed share sale in China Eagle passed yesterday morning.
Mr Wong, the chairman and controlling shareholder of both firms, said poor global market sentiment was to blame.
'Investors globally have expressed interest in the company following an extensive marketing programme. However, the timing was unfortunate given the current weak global market sentiment and the disappointing performance of recent initial public offerings in Hong Kong and globally,' he said in a statement sent through the placement's book-runner ABN Amro Rothschild.
Mr Wong, who last month sold 65 per cent of Gome to China Eagle for 8.8 billion yuan, had planned to tap as much as $3.75 billion by selling 575 million China Eagle shares at between $4.85 and $6.53.
The deal was later repriced at between $4.05 and $4.85 and the number of shares was reduced to 400 million on Thursday because the first placement attempt failed to draw enough orders.
An ABN spokesman said investors had placed enough orders to cover the minimum offer size of $1.62 billion, but Mr Wong decided to cancel the proposed share placement on concerns about aftermarket performance.
'Mr Wong and ABN are concerned about the aftermarket performance of the shares and do not wish to see potential losses by investors, as has happened recently in a number of international offerings,' the spokesman said.
Fund managers were unenthusiastic about the share placement, saying it was too pricey.
The proposed share placement was aimed at meeting the minimum 25 per cent public float requirement.
Mr Wong held 74.9 per cent of China Eagle after he sold the Gome stake to the listed company. In return, he received $243.5 million of new China Eagle shares and a two-tranche convertible note of $8.05 billion. Mr Wong's stake would rise to 97.2 per cent if he converts all the notes into China Eagle shares. He can convert the notes anytime within the next three years.
Market watchers believed weak sentiment would continue to hurt upcoming stock offerings, unless companies were willing to sell shares at attractive prices.
'If Sinopec is selling its shares at a big discount to market price, fund managers will be interested in buying,' a fund manager said.
Nasdaq listing candidate 51Job, a mainland recruitment portal, is withholding its US$90 million IPO amid cooling investor sentiment towards China's internet sector. The firm is waiting for signs of a pick-up in investor sentiment before relaunching the offer, sources said.
