Pandemic-induced hunger for IPOs keeps Hong Kong’s investment bankers busy
- If a slowdown in listings on the mainland pushes even more firms to Hong Kong, the hub could see a record year, according to a Bloomberg Intelligence analyst
- Many firms pushing to sell shares have yet to find a sustainable way to make profits, including Chinese grocery delivery apps such as Meicai and Dingdong Maicai
Hong Kong’s bankers are working around the clock as the region’s companies rush to go public.
Companies are trying to “get the deal done as soon as they can”, said Stephanie Tang, head of private equity for Greater China at law firm Hogan Lovells. “Many of them see this as an opportunity and if they are not catching the train quickly, they might lose the opportunity.”
Representatives for Goldman Sachs and Citi declined to comment on the deals. WeDoctor also declined to comment.
“It’s busier than ever,” said Udhay Furtado, Citi’s co-head of Asia Equity Capital Markets. “This is an attractive window for issuers and liquidity is available across financing products.”
But the bustle comes loaded with execution risk as Chinese markets in early February started to stumble after a two-year rally and what is looking like the biggest-ever quarter for IPOs fuelled by a US-led boom in blank-cheque listings.
Many companies pushing to sell shares have yet to establish a sustainable way to make profits, including Chinese grocery delivery apps such as Meicai and Dingdong Maicai, who are facing heavy cash burn to win market share.
Liao Ming, the founder of Prospect Avenue Capital, which oversees US$500 million in private equity assets, said he expects at least five of his portfolio companies to list this year, out of a total 12.
“A lot of these companies including the grocery space, wouldn’t be able to find investors in a normal year,” said the Beijing-based former Morgan Stanley banker. “But because of the bullish sentiment this year, a lot of companies that aren’t ready yet are rushing to get out the door.”
Charles Chau, Hong Kong-based partner at law firm Jones Day, said most clients are trying to submit IPO applications by March and supply additional financial statements by June to get a listing done by September.
The rush back home by Chinese stalwarts has been going since last year, when firms such as NetEase and JD.com listed in Hong Kong. And now with Chinese regulators looking at tightening rules in Shanghai, it could impact a heavy backlog of deals and bring more to the financial hub.
If a slowdown in listings on the mainland pushes even more firms to Hong Kong, the hub could see a record year, wrote Sharnie Wong, an analyst at Bloomberg Intelligence. There were 735 IPO applications in mainland China in early March, compared with 500 last year, she said.
Last year, Hong Kong saw US$52 billion in listings, just below the US$58 billion that was raised in 2010, according to data compiled by Bloomberg.
The migration to virtual roadshows means bankers are able to pack more meetings into their schedules. “IPO professional intermediaries have transformed themselves,” said Edward Au, southern region managing partner at Deloitte China.
In the US, markets have boomed with the listings of SPACs, or special purpose acquisition companies. That is also now reshaping Asian banking. JPMorgan Chase and Credit Suisse Group have pulled people from corporate finance and equity capital markets to focus on those types of deals in Asia, according to people with knowledge of the moves.
Credit Suisse declined to comment.
Francesco Lavatelli, head of equity capital markets for Asia Pacific at JPMorgan, said the US bank has a “healthy pipeline” of deals, including SPAC IPOs and mandates from companies looking to combine with an already listed SPAC, known as a deSPAC.
He said the recent stock turmoil is unlikely to derail the deals on tap. “If anything, it will accelerate plans, which might mean in some cases a deSPAC process,” the Hong Kong-based banker said.