On the face of it, an initial public offering (IPO) for WH Group, the world's biggest pork company, should have been an easy sell.
China has huge and growing demand for pork, and WH, created when China's largest meat processing firm, Shuanghui International, acquired the world's biggest hog producer, Smithfield Foods, it was well placed to deliver growth in a highly fragmented market.
But this week, WH slashed its proposed IPO by two-thirds to US$1.9 billion - a result, fund managers and bankers say, of the company and its owners seeking too high a price, hiring too many underwriters (a record 29), and negative publicity over some sky-high executive compensation.
The company also had sheer bad luck, as sentiment towards new listings slid worldwide.
"The company was a little too aggressive in the early stage of their marketing process. They were hungry for a large deal at quite a demanding valuation, plus the market, near term, didn't turn in their favour," said Tony Chu, a Hong Kong-based portfolio manager at RS Investments.
Many investors and some underwriters had concerns about the deal, because WH was looking to list just seven months after the Smithfield purchase, too short a time for it to have wrought synergies from the integration, people familiar with the IPO said.
Launching the IPO two weeks ago, WH set an unusually wide indicative range of HK$8 to HK$11.25 - a 40 per cent difference between the top and bottom end - ignoring several bankers' recommendations to price the deal more modestly.
"The range was very wide, which indicated they didn't want to believe what the market told them during the premarketing period, which was [it was looking for a price-earnings ratio] of 15 times," said one person involved in the IPO.
"They thought: OK, maybe we can get 20 times, so let's make it wider. The market hates that."
The revised offering is equivalent to a 2014 price-to-earnings multiple of 13.9-19.3 times, from 15-20.8 times previously, sources said. Global listed peers trade at an average of 17.5 times forward price to earnings, according to Thomson Reuters data.
"I can understand why the market would add a risk premium to this deal, just because of its complexity and of its short life history since coming together," said Keith Pogson, managing partner for financial services at consultancy EY in Hong Kong.
Asked about the pricing, WH said in a statement: "The valuation range is a technical consideration which was jointly decided by the company and the sponsors in light of the market conditions and multiple factors."
Shareholders that were looking to sell shares under the initial plans included China private equity firms CDH Investments and New Horizon, Goldman Sachs and Singapore sovereign wealth fund Temasek.
Goldman, Temasek and CDH declined to comment on the offer's pricing, while New Horizon didn't respond to a request for comment. Under the revised deal, shareholders will no longer cash out in the IPO.
The company's failure to attract cornerstone investors underscored the lack of agreement about pricing. Most large IPOs in Asia will secure cornerstones, who receive a guaranteed allocation in exchange for agreeing to retain their stakes for a set period.
A lack of cornerstone investors for sizeable offerings, while unusual, is not unprecedented, with Chow Tai Fook Jewellery and Prada both managing to debut without them, and WH was undeterred, wooing so-called "anchor investors" willing to buy big chunks of the offering.
But then, after a long, strong run, world stock markets pulled back, and new listings began to flounder, causing anchor investors to get cold feet, people working on the IPO said.
To make matters worse, the prospectus revealed WH paid a combined US$600 million share award to chief executive Wan Long and the head of its M&A department for clinching the Smithfield acquisition - equivalent to 12 per cent of that deal and raising corporate governance concerns.
The record number of banks managing the IPO resulted in a lack of co-ordination, irritating fund managers. It also created less of an incentive, as they all had to share the fees.