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Hong Kong IPOs rush to beat the clock
HONG KONG'S IPO market is unexpectedly coming back to life. It may be a brief revival.
Companies from Anheuser-Busch InBev SA's Asian unit to Megvii Technology Ltd aim to raise more than US$10 billion selling shares before the year is out. It's a turnaround that appeared improbable as recently as mid-August, when the Hang Seng Index erased its gain for the year amid anti-government protests and concerns over weakening global growth.
Hong Kong's benchmark stocks gauge has bounced 8 per cent since Aug 13, among the best-performing indexes worldwide in that period, as traders bet that China's government will try to buoy investor spirits in the run-up to Oct 1, when the country celebrates the 70th anniversary of the founding of the People's Republic. That's created a window of opportunity for companies that previously struggled to generate enough investor interest.
Budweiser Brewing Company APAC Ltd is the prime example. The unit of AB InBev, the world's largest brewer, pulled what would have been the world's biggest initial public offering in mid-July after failing to draw sufficient demand for the US$9.8 billion sale. The company is back with a pared-down US$5 billion offering and aims to list by the end of September, Carol Zhong, Julia Fioretti, Jinshan Hong and Crystal Tse of Bloomberg News reported last week, citing people familiar with the matter.
The brewer is seeking to list minus its Australian operations, which the company agreed to sell to Asahi Group Holdings Ltd. for US$11.3 billion soon after withdrawing its IPO in July. That hived off a slower-growing part of its operations, which may help attract investors who balked at Budweiser Brewing's valuation last time around.
Other than a rising stock market, a simple technical reason may account for the brewer's haste to try again. A company that seeks to list within six months of its first application doesn't need to prepare a new set of accounts, meaning Budweiser Brewing can just strip the Australian operations from its financials when pitching to investors this time around.
Others lining up at the IPO well include Megvii, a Beijing-based artificial intelligence startup that's seeking US$1 billion; consumer lender Home Credit NV, which is targeting as much as US$1.5 billion; Chinese sportswear retailer Topsports International Holdings Ltd, which aims to raise about US$1 billion; and ESR Cayman Ltd, a logistics real estate developer backed by Warburg Pincus that earlier shelved a US$1.2 billion deal. The first to list of the current crop may be biotechnology firm Shanghai Henlius Biotech Inc, which has already started taking orders for a US$477 million sale.
The biggest flotation of all may come in October, when New York-traded Alibaba Group Holding Ltd. will seek to raise as much as US$15 billion in a secondary listing, Reuters reported last month.
The resurgence in the IPO market is a tonic for Hong Kong Exchanges & Clearing Ltd, which has faced skepticism over its US$36.6 billion bid for London Stock Exchange Group Plc and whose shares have dropped 16 per cent from this year's high. Hong Kong has slipped in the pecking order of global stock exchanges after topping the rankings in 2018. Companies raised US$10.8 billion in IPOs this year through Sept 13, less than half of the total in the same period last year.
The question is whether there will be enough investor demand to soak up all the stock that an eager and growing group of listing candidates is waiting to thrust on buyers. Meanwhile, Hong Kong's economy is deteriorating and the protests haven't gone away. Companies must also consider whether China's feelgood efforts will extend beyond Oct 1.
Time may be of the essence for this crowd.
Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.