Investing in IPOs in Asia Is Not for Faint of Heart

(Bloomberg) -- Investing in initial public offerings in Asia is not for the faint-hearted.

Buyers of Chinese internet giant Meituan Dianping’s $4.2 billion IPO last year got their first proper returns on Monday, when the stock surged to its highest level since the share sale on news of the company’s first quarterly profit. Before that, the stock rose above its offer price of HK$69 only a handful of times: during its first week of trading last September, in July and last week.

Meituan’s is a familiar story. Of the 116 companies that closed below their offer price on the first day of trading in Asia excluding Japan last year, 84% weren’t any higher after the one-year mark, data compiled by Bloomberg show. And of the 429 stocks that closed above or at their IPO prices, half dropped below the sale price after 12 months.

Another notable example is smartphone maker Xiaomi Corp, which completed Asia’s second-biggest IPO last year and is down 49% from its offer price. It touched a high of HK$22.2 about 10 days after it began trading before embarking on a downward path.

Investors and bankers will point to a variety of reasons to explain the patchy performance of IPOs in Asia, including founders’ preference to sell at the highest possible price along with lower liquidity in regional markets compared with the U.S. and Europe. Market volatility due to trade-war rhetoric hasn’t helped, either.

To be sure, 86% of shares that closed below their IPO price in the U.S. are lower than that price after a year, the data show. Still, of the companies that closed above or at the IPO price on their first day, only 39% of them were below that level after a year.

UPCOMING LISTINGS:

  • Shanghai Henlius Biotech
    • Hong Kong exchange
    • Got listing approval Aug. 22
    • Size at least $600m
    • Started gauging investor demand Aug. 26
  • Telefast Indonesia (provider of enterprise software solutions)
    • Kresna Sekuritas and Trimegah Sekuritas
    • Expected offering period Sept. 9-11
    • Expected listing Sept. 16
  • AllHome (home-furnishing retailer)
    • Size about $230m
    • Approved by Philippines exchange Aug. 19
    • Owned by billionaire Manuel Villar
  • Beijing ABT Networks (maker of security products)
    • Shanghai Star market
    • Expected to take orders Aug. 28; listing date TBA
    • Tianfeng Securities
  • Ruida Futures (Chinese brokerage)
    • Shenzhen exchange
    • Expected to take orders Aug. 27; listing date TBA
    • Citic Sec., Essence Sec.

More ECM situations we are following:

  • Hanwha Aerospace unit Hanwha Systems seeks to sell shares on the Korea Stock Exchange, according to an emailed statement from the bourse
  • Pharmaron Beijing has filed for a Hong Kong listing
  • Viettel Group, Vietnam’s largest mobile carrier, plans to sell stakes in three units followed by a listing next year, Chief Executive Officer Le Dang Dung said in an interview

SEE ALSO

  • Asia ECM Weekly Agenda
  • IPO data
  • U.S. ECM Watch
  • EU ECM Watch
  • To receive the ECM Watch in your inbox daily, click the “subscribe” button at the top of this article

©2019 Bloomberg L.P.

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