OpinionDon your sleuth's hat to enter Huishan's prospectus maze
After combing the fine print to work out who is selling down – and what they will make – in dairy producer's float, unsettling questions remain
A listing prospectus is usually not the most readable of documents, whether intentionally or not. The one prepared by three big securities houses for mainland dairy producer China Huishan Dairy Holdings is a classic.
The document, which was published a month after the Hong Kong exchange issued a guidance letter requiring prospectuses to be more user-friendly, provides no straight answer to a very fundamental question: who is selling what?
Just think of a listing in which the controlling shareholders are cashing out. How much confidence do they have in the company's future?
That's particularly important in assessing a company that has a short history like Huishan. It began operation in 2009 and profit numbers were largely distorted by "biological asset fair value change" - meaning the value of the cows and grass.
Let's walk through the maze. On the cover of the prospectus, the company says it selling 2,534 million new shares and 874 million old shares. So some existing shareholders will pocket a quarter of the money raised.
The summary provides no clue as to who they are, but says the company will get HK$6.9 billion. Some "selling shareholders" would receive HK$2.1 billion and the "selling shareholders and option grantors" would gain HK$3.5 billion "pursuant to the over-allotment option".