Budweiser’s mega IPO gets cool response from Hong Kong investors as high borrowing costs take the fizz out of demand
- The retail offering for the world’s biggest IPO of the year is estimated to be 3.7 to 5 times oversubscribed, far below earlier forecasts of 10 to 15 times
- Demand was crimped by high interest rates which made investors reluctant to borrow from brokers to buy the shares, say analysts
For many people there is nothing worse than a flat beer. Demand in Hong Kong for the biggest IPO of the year so far was anything but sparkling as Budweiser Brewing Company APAC’s shares proved they were not to everyone’s taste.
The retail offering, which ran from Monday until noon on Thursday, is probably about 3.7 to 5 times oversubscribed, locking in HK$18 billion (US$2.3 billion) to HK$23 billion of capital, according to the latest estimates of 10 stock brokers polled by the South China Morning Post. That is far lower than initial forecasts that the IPO would be 10 to 15 times oversubscribed.
Budweiser Brewing, the Asian unit of beer giant Anheuser-Busch InBev, aims to raise up to US$9.8 billion with its Hong Kong listing.
Analysts said the ice cold response from retail investors in Hong Kong was probably the result of high borrowing costs.
“The Budweiser offering came at a time when the interbank interest rate had risen to the highest in a decade. This has made many investors reluctant to borrow money from stockbrokers to subscribe to the stocks. Many investors are only using cash to subscribe to the Budweiser IPO, which has cut down the leverage,” said Louis Tse Ming-kwong, VC Asset Management’s managing director.
“Budweiser is a big international company. It is so big that it is likely to be added as a constituent stock of the benchmark index. It is expected to be a good long-term investment, but for the retail investors who want to bet on short-term gain, it is not that attractive.”
The one-week Hibor (Hong Kong interbank offered rate) rose to 3.65 per cent last Thursday, the highest since October 2008, as brokers and banks began fighting for money in the interbank market to prepare for investors to borrow from them to subscribe to the biggest IPO of the year. The rate immediately fell back to 2.23 per cent on Thursday when the IPO sale closed.
The high cost for brokers led them to set their margin lending rate higher for the Budweiser IPO, in a range between 3.88 per cent and 5 per cent. The normal rate for an IPO would be around 2 per cent.