Mega IPOs are spawning Asian billionaires at a torrid pace

Hong Kong

ANOTHER day. Another IPO. Another Chinese billionaire magically appears.

Mu Rongjun, the co-founder of food delivery behemoth Meituan Dianping, is poised to be the latest to join the club as the company announced plans to go public last month.

Of the 27 billionaires to surface in Asia this year, about a third did so through initial public offerings in Hong Kong and Shenzhen, according to the Bloomberg Billionaires Index.

Now the question is whether that torrid pace of wealth creation can continue as global trade tensions mount and markets struggle to hold gains. Investor demand already appears to be flagging for Xiaomi Corp's upcoming US$4.7 billion debut, and the iShares MSCI Emerging Markets Asia ETF, which surged 41 per cent last year, tumbled 6.2 per cent in the six months through June, the worst first half since 2013.

Xiaomi IPO is said to draw bids at 9.4 per cent discount in the gray market.

Market volatility fuelled by fears of a trade war could pose challenges for Meituan Dianping ahead of the IPO, said Ryan Roberts, a senior analyst at MCM Partners in Hong Kong.

"There are definitely arguments that there are some valuation bubbles in Chinese technology companies, especially for those that have not yet turned profitable, which can make establishing their valuation difficult in a public offering," Mr Roberts said. "Investors backing the IPO need to have conviction that profitability and cash flow generation are on the horizon at some point, not just a promise."

Meituan Dianping, backed by top shareholder Tencent Holdings Ltd, is burning cash to fuel scorching growth and turning to the public markets for more as it takes on China's biggest Internet companies in food delivery, hotel booking and movie ticketing. It posted a 2017 loss of 19 billion yuan (S$3.9 billion) as spending on marketing and research ballooned.

Company co-founder Wang Xing was already known to be a billionaire before the filing of a prospectus that showed him to have an 11.4 per cent stake before the offering. That's worth US$6.2 billion based on a reported US$60 billion valuation. Mr Mu has a US$1.4 billion fortune with his 2.5 per cent holding. The Beijing-based firm declined to comment on the valuation and the founders' wealth.

The January IPO of C-Mer Eye Care Holdings Ltd produced this year's first new Chinese billionaire, Dennis Lam, who also became Hong Kong's first billionaire ophthalmologist. Xiaomi's offering could produce at least three others, while the debut of Contemporary Amperex Technology Co Ltd, the world's biggest maker of batteries for electric vehicles, brought four within its first week of trading. Those eight tycoons, along with Mr Mu, had a combined net worth of US$18.5 billion as of July 3. BLOOMBERG