Overseas investors are calling a time-out on Chinese initial public offerings. Wanda Sports on Friday raised $190 million after pricing its IPO below an already revised range, following a wave of companies that have shelved or valued listings cheaply outside of the mainland due to poor demand. Geopolitical tensions are making buyers wary of issuers from the People's Republic.
The triathlon-to-badminton business controlled by billionaire Wang Jianlin's conglomerate Dalian Wanda was always going to be a tricky sell. The company, which organises the iconic 'Ironman' event, is loaded with debt and its mix of different businesses makes it hard to value. Still, at the top of its original range it was priced at 12.2 times forward EBITDA, Refinitiv publication IFR reported. That's less than Manchester United, admittedly an imperfect comparison, which trades at 15.7 times.
Yet foreign buyers are setting a high bar for Chinese companies looking to go public, even ones with sizeable overseas operations like Wanda Sports. Poor performance is one explanation. Globally, IPOs have been on a tear this year: New stocks have gained 56% on average since listing, double the increases on those last year, Dealogic reckons. But that figure has been dragged down by Hong Kong and US IPOs of Chinese companies, which have risen 7%. Those that listed last year are down 11.5%.
As a result, 28 Chinese companies including e-commerce warehouse operator ESR shelved offerings this year, more than double the last record in 2011, Dealogic data shows. Roughly 40%, including video-game streaming startup DouYu, priced at the bottom of marketed ranges.
Investors have reason to give Chinese companies a wide berth, especially those debuting state-side. The trade war is adding to concerns over China's economy, where growth is slowing. And US legislators introduced a bill last month threatening to delist Chinese companies unless they allow American regulators to access their audits.
There are less fretful ways to profit back home: the MSCI China is up 13.1% this year. The trade war has weighed on consumer-discretionary stocks, but investors are still bullish on tech, real estate and financials. As long as cross-border tensions are high, overseas deals from the mainland may get shown a red card.
Comments
Comments are closed.