Fosun offering muscles out smaller players
Mainland conglomerate Fosun International attracted at least HK$21.5 billion worth of retail orders for its first-time share sale when subscription opened yesterday, and brokers said the deal was on the way to becoming Hong Kong's most popular initial public offering.
Four local brokerages polled by the South China Morning Post together reported HK$21.5 billion of orders through margin financing, already double the HK$11.54 billion deal and about 18 times the retail tranche, accounting for 10 per cent of the shares.
Some brokerages, such as Phillip Securities, which lent HK$5 billion of margin loans for Fosun's shares, exhausted their available funds yesterday.
'Retail investors are betting on Fosun's growth prospects,' said Cherrie Yan Cheuk-yi, a corporate finance officer at Phillip Securities, adding that investments by billionaires in the Shanghai-based company had also strengthened the confidence of retail investors.
Dubbed 'Shanghai Hutchison' after the sprawling Hutchison Whampoa conglomerate, Fosun has attracted 11 cornerstone investors.
Among these are Henderson Land Development chairman Lee Shau-kee, the Government of Singapore Investment Corp and China Life Insurance.
They will buy a combined US$220 million worth of Fosun's initial public offering shares.
The cornerstone investors have agreed not to sell their shares until six months after the listing.
The retail portion of Fosun's offering was likely to be 500 times oversubscribed, soaking up more than HK$500 billion worth of funds, and replace ladies' footwear retailer Belle International as the city's most popular initial public offering. Belle, which raised HK$9.96 billion last month, tied up HK$446 billion of funds from retail investors.
Fosun, which will close its retail subscription on Thursday, is offering 1.25 billion shares, or 20 per cent of its enlarged share capital, at a price range of HK$6.98 to HK$9.23.
The deal is distracting investors from other smaller initial public offerings which are in the market at the same time, such as Jiangsu Times Supermarket.
Of the four brokerages polled by the South China Morning Post, only Sun Hung Kai Financial lent out HK$20 million of margin loans for Jiangsu Times.
Demand for another two initial public offerings - New World Department Store China's HK$2.36 billion deal and China Automation's HK$360 million deal - were also not particularly strong, brokers said.
Meanwhile, sources said Taiwan-based shoemaker Stella International had raised HK$3.02 billion after pricing its offer at the top of an indicative range at HK$15.50 per share.
Paper tissue maker Vinda International is also likely to price its HK$1.1 billion offering at the top end after its retail portion was 100 times oversubscribed and its institutional portion 20 times oversubscribed.