Property tycoons are lending their support to the Hong Kong IPO market for the first time in years, a move that could help fan the flames of a nascent recovery.
Billionaire Robert Ng’s Sino Land Co is one of the largest cornerstone investors in the US$793 million Hong Kong listing from courier service SF Holding Co. that kicked off this week. An investment vehicle backed by the family of New World Development Co. Chairman Henry Cheng is also among the 10 parties that committed to buy stock in the offering in return for guaranteed allocation.
Companies seeking to list in Hong Kong used to regularly solicit backing from local property tycoons, revered as savvy investors in a city whose wealth was built on real estate. The practice waned in recent years as Chinese state-owned enterprises began taking more prominent roles — Hong Kong-based billionaires haven’t been cornerstone investors in any major offering priced in the city after the start of 2022, according to data compiled by Bloomberg.
“Having tycoons on a deal like this shows that they have a commitment to Hong Kong, they have a commitment to the Chinese economy, and they have a conviction in the medium to long term,” Andy Maynard, head of equities at China Renaissance Securities, said by phone Wednesday. “It’s a vote of confidence.”
The volume of Hong Kong listings has been picking up in recent months after a quiet 2023, with fundraising volumes rising 92% so far this year to $9.1 billion, data compiled by Bloomberg show. SF — known as the FedEx of China — could rank as the city’s second-largest offering this year if it prices at the top end of the marketed range.
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Already listed in Shenzhen for more than a decade, SF is raising funds in Hong Kong to expand its overseas logistics network. It is planning to sell a combined $205 million worth of shares to cornerstone investors who have agreed to hold the stock for at least six months. The presence of local tycoons in an offering can help drum up interest from other high net worth individuals as well as Hong Kong retail investors, according to Eliot Fisk, a former equity capital markets banker at JPMorgan Chase & Co. who is now a consultant on the sector.
Sino Land, the Hong Kong developer that owns the Fullerton hotel chain, is investing US$25 million in the SF listing, while the vehicle backed by New World’s Cheng family is putting in $20 million. They’re being joined by Oaktree Capital Management LP, Morgan Stanley, smartphone maker Xiaomi Corp and China Pacific Insurance Group Co.
The tycoons may have been lured by SF’s attractive valuation, said Kenny Wen, head of investment strategy at KGI Asia. SF is marketing the offering at a discount of as much as 29% to its Shenzhen-listed stock.
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Representatives for Sino Land and the Cheng family’s holding company didn’t respond to requests for comment.
Still, sentiment toward new offerings remains “very cautious” unless there’s a big name with a good story to tell, said Alex Wong, director of Alex KY Wong Asset Management Co. While larger share sales have started coming back to Hong Kong, there’s only been one listing above US$1 billion this year and fundraising volumes remain well below the heyday of 2020, when US$51.7 billion was raised from initial public offerings.
A number of IPOs are in the pipeline, including Chinese digital retail platform Dmall Inc, which started gauging investor interest last week. Meanwhile, soy sauce producer Foshan Haitian Flavouring & Food Co and drugmaker Jiangsu Hengrui Pharmaceuticals Co are planning second listings in Hong Kong that could each raise well over US$1 billion, Bloomberg News has reported.
SF’s offering could be a marker of investor appetite for Chinese issuers, according to Lorraine Tan, director of Asia equity research at Morningstar Inc.
“If it’s relatively well received, I think it could encourage a few more companies to test the waters,” Tan said. “But if not, it essentially indicates that challenges should persist for the IPO pipeline.”
