Two more firms delay share sales

Nexteer Automotive and Wisdom become the latest casualties amid fears over end of US easing and mainland economy

PUBLISHED : Thursday, 27 June, 2013, 12:00am
UPDATED : Thursday, 27 June, 2013, 4:26am

At least two firms, a US-based car parts supplier and a mainland media and advertising company, have deferred their plans to list in Hong Kong, according to people familiar with the deals.

Nexteer Automotive, a Michigan-based steering and driveline systems producer that was acquired in 2010 by Pacific Century Motors, an investment arm of the Beijing municipal government, did not price its share sale yesterday - the cut-off date for it to list on July 3 .

The company is the latest casualty of the recent market weakness triggered by fears over the United States tapering its quantitative easing programme and the deteriorating macroeconomic outlook on the mainland. It had planned to raise about US$325 million through the float.

Wisdom Group, a Beijing-based media and advertising firm, also postponed its planned US$100 million offering but people familiar with the deal said it might still revive the official roadshow this week. Bankers working on the offering said the planned share sale had received substantial backing from cornerstone investors.

Despite the gloomy market outlook, Edward Au, a partner at Deloitte, said: "Hong Kong's initial public offering market is expected to pick up in the second half, underpinned by favourable mainland policies."

The audit firm has forecast the overall capital raised this year will range from HK$100 billion to HK$130 billion, not taking into account the mega listing of Alibaba. It also predicted "huge discrepancy in valuations among investors and the issuer".

Alibaba is likely to kick off its long-planned IPO in the last quarter of this year. Bankers and private-equity investors in the US and Asia are in talks with China's biggest e-commerce firm, which is valued at between US$80 billion and US$120 billion.

The size of Alibaba's offering will depend largely on how many shares it plans to sell and what kind of assets it will include in the float. It is understood that Alipay, China's version of PayPal, will not be included in the listing because of regulatory restrictions.

One banker said Alibaba had penetrated almost every aspect of the internet with sites like consumer-to-consumer Taobao. It also operates the world's biggest business-to-business marketplace.

Some small players are planning to brave the weak market and launch IPOs. S.Culture, a local retailer of shoes and apparel, is preparing to raise HK$100 million through a Hong Kong listing after getting regulatory approval yesterday. The firm has offered an indicative price range of HK$1.50 to HK$2 a share.

Macau Legend Development has slashed its share sale by more than half to HK$2.79 billion, while keeping the price range and the size of the retail tranche unchanged.

The outlook for capital raising in Hong Kong remains challenging as the deteriorating outlook for the mainland's credit crunch has hit market sentiment. Given the prospect of the US turning off the cash tap, market players have been increasingly looking to the mainland for direction but poor factory data there has come as a dampener.