Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Capital Markets

Hygeia Healthcare Group / Equity Capital Markets

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<p>For primary listings in Hong Kong, there are standard rules as to the lock-up duration. There are exceptions - lock-ups can be entered into and negotiated with underwriters, as is often the case for secondary listings.</p>
<p>There are other quirks such as specific lock-ups with respect to share incentive schemes, such as in <a href="https://www.smartkarma.com/entities/shenzhen-hepalink-pharmaceutical-h" target="_blank" data-smartkarma-citation="entities:29142:1" rel="noopener">Shenzhen HepaLink Pharmaceutical (H) (9989 HK)</a>, which have their own unique lock-up period - although in this case, the % of shares out (0.31%) affected  is largely immaterial. </p>
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<p>According to <a href="https://en-rules.hkex.com.hk/rulebook/1007-0" target="_blank" rel="noopener">Main Board Rule 10.07(1)</a> (or <a href="https://en-rules.hkex.com.hk/rulebook/1316a" target="_blank" rel="noopener">GEM rule 13.16A(1)</a>), if a person/group of persons is/are listed as the controlling shareholder(s) of the issuer's listing application, they must adhere to a 6-month lock-up from the date of listing.</p>
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<p>For cornerstone investors, the following is often stated in the share offer document:</p>
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<p>Each of the Cornerstone Investors has agreed that it will not, whether directly or indirectly, at any time during the period of six months from and including the Listing Date (the “Lock-up Period”), dispose of any of the Offer Shares they have purchased pursuant to the relevant Cornerstone Investment Agreements, save for certain limited circumstances ... <br>Hepalink's <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0624/2020062400097.pdf" target="_blank" rel="noopener">Global Offering Doc</a> (page 403)</p>
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<p>Every week in my <a href="https://www.smartkarma.com/compose/insight/46538/Last%20Week%20in%20Event%20SPACE:%20Japan%20Post,%20JD.com,%20Toyota,%20NTT,%20Jardines,%20Indices/Exec.%20Orders,%20Tianneng.%20Read%20more:%20https:/skr.ma/vhr6W" target="_blank" rel="noopener">Event SPACE</a> wrap, I flag large moves (~10%) in CCASS holdings over the past week or so, moves that are often outside normal market transactions.  These may be indicative of share pledges.  Or potential takeovers. Or simply help understand volume swings. </p>
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<p>Large movement(s) concerning recently listed companies are likely lock-up related. </p>
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<p>This monthly insight looks at companies that have been listed for around six months, as a guide to when insiders/controlling shareholders are permitted to sell, potentially creating an overhang which could depress prices.</p>
<p>I've also constructed a chart highlighting the performance of IPOs leading up to their lock-up, and compared this to the HSI index. The results are interesting. Spoiler - recent IPOs underperform. </p>
</div>
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<p>A summary of Main Board listings in 2020 is also attached at the bottom of this insight.</p>
<p>More below the fold.</p>
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For primary listings in Hong Kong, there are standard rules as to the lock-up duration. There are exceptions - lock-ups can be entered into and negotiated with underwriters, as is often the case for secondary listings.
There are other quirks such as specific lock-ups with respect to share incentive schemes, such as in Shenzhen HepaLink Pharmaceutical (H) (9989 HK), which have their own unique lock-up period - although in this case, the % of shares out (0.31%) affected  is largely immaterial. 


According to Main Board Rule 10.07(1) (or GEM rule 13.16A(1)), if a person/group of persons is/are listed as the controlling shareholder(s) of the issuer's listing application, they must adhere to a 6-month lock-up from the date of listing.


For cornerstone investors, the following is often stated in the share offer document:



Each of the Cornerstone Investors has agreed that it will not, whether directly or indirectly, at any time during the period of six months from and including the Listing Date (the “Lock-up Period”), dispose of any of the Offer Shares they have purchased pursuant to the relevant Cornerstone Investment Agreements, save for certain limited circumstances ...  Hepalink's Global Offering Doc (page 403)



Every week in my Event SPACE wrap, I flag large moves (~10%) in CCASS holdings over the past week or so, moves that are often outside normal market transactions.  These may be indicative of share pledges.  Or potential takeovers. Or simply help understand volume swings. 


Large movement(s) concerning recently listed companies are likely lock-up related. 


This monthly insight looks at companies that have been listed for around six months, as a guide to when insiders/controlling shareholders are permitted to sell, potentially creating an overhang which could depress prices.
I've also constructed a chart highlighting the performance of IPOs leading up to their lock-up, and compared this to the HSI index. The results are interesting. Spoiler - recent IPOs underperform. 


A summary of Main Board listings in 2020 is also attached at the bottom of this insight.
More below the fold.


Hong Kong IPOs: Lock-Up Expiries (December 2020 Edition)

APAC IPOs & Placements

Zhen Zhou, Toh

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Aequitas Research puts out a weekly update on the deals that have been covered by Smartkarma Insight Providers recently, along with updates for upcoming IPOs.
It has been a strange week in the IPO space.
On one hand, Hong Kong IPO sentiment is looking up on the back of strong performance of Topsports International (6110 HK) and Budweiser Brewing Company APAC (1876 HK) from a week ago. Smaller listings like 360 Ludashi (3601 HK) and Xinyuan Property Management (1895 HK) were up by 218% and 41% on their first day respectively. Ludashi, specifically, opened up about 100% and continued to trade much higher.
Granted these are small-cap companies but their strong debut could translate into a rush for small Hong Kong IPOs (US$100m - 300m deal size) to complete their listing before the year end. 
On the flip side, U.S. blacklisted Chinese AI tech firms which included Megvii Technology (1737211D HK) we thought would be one of the hotter IPOs going into Q4. Goldman was also said to be reviewing that role as bookrunner in the IPO which certainly doesn't bode well for the company. Also, FriendTimes Inc (6820 HK)'s weak debut (30% below IPO price) despite being priced at 6.5x FY2019E P/E doesn't bode well for upcoming game developers' IPOs such as XD Inc. (XD HK) and China Mobile Games Adr (CMGE US). 
IPO pipeline is still looking busy. 

We are hearing that China Feihe (FEIHE HK) and Metro Pacific Hospital Holdings Inc (HOSP PM) are looking to pre-market next week.
Youdao (DAO US) will likely look to launch its IPO.
Lion Air is also seeking to IPO towards the end of this year.
Onsite Rental is said to be seeking US$475m IPO in Q4 2019.

Australia ECM is also getting active with PropertyGuru (PGU AH) looking to IPO soon. Latitude Financial Services (1272471D AU) will start its bookbuild next week while Home Consortium will start trading. However, MPC Kinetic Holdings Ltd (MPK AU) had been an unfortunate casualty, pulling its IPO citing weak demand.


Latitude Financial Group IPO - Steady but Slow - In the Grey Zone 

PropertyGuru IPO - Powered by Singapore, Recharged by Vietnam but Dragged Down by Others 

PropertyGuru IPO - SOTP Leaves One Well Short of the Low-End 

Other IPOs to watch out for are REIT listings in Philippines. There was recently a proposal that will look to halve the minimum public shareholding to 33% from 67% which could pave the way for REIT listings. Companies such as Ayala Land Inc (ALI PM), Doubledragon Properties (DD PM), SM Land, Robinsons Land and Megaworld have planned REIT listings that could come to the market soon.
Accuracy Rate:Our overall accuracy rate is 72.6% for IPOs and 64.9% for Placements (Performance measurement criteria is explained at the end of the note)
New IPO filings this week  

Heaven-Sent Gold Group (US$200m, re-filed, Hong Kong)
PropertyGuru (US$250m, Australia)
Below is a snippet of our IPO tool showing upcoming events for the next week. The IPO tool is designed to provide readers with timely information on all IPO related events (Book open/closing, listing, initiation, lock-up expiry, etc) for all the deals that we have worked on. You can access the tool here or through the tools menu.Source: Aequitas Research, SmartkarmaNews on Upcoming IPOs  
China Everbright Group to restructure, pursue billion-dollar Hong Kong IPO
Canaan Will Be Listed Publicly in the US in November
Goldman Reviews Megvii’s HK IPO After U.S. Places Chinese Tech Firms on Blacklist
Indonesia's Lion Air set to list shares
Temasek said to rule out investment in mega Saudi Aramco IPO
Analysis on Upcoming IPOs  

ESR Cayman Re-Pre-IPO - Another Stab at Valuation 

JS Global (JS 环球生活) PHIP &amp; Thoughts on Valuation - Paid a Premium for a Good Brand 

Languang Justbon Services (蓝光嘉宝) Pre-IPO Review - Weaning off Its Parent 

Languang Justbon Services (蓝光嘉宝) IPO Review - Cheap for a Reason 

Q&amp;K Intl (青客) IPO: Yet Another WeWork Model that Will Not Work 

FangDD (房多多) IPO: Reminiscence of SFUN? 

Latitude Financial Group IPO - Steady but Slow - In the Grey Zone 

PropertyGuru IPO - Powered by Singapore, Recharged by Vietnam but Dragged Down by Others 

PropertyGuru IPO - SOTP Leaves One Well Short of the Low-End 

MPC Kinetic IPO: A Leading Subcontractor to Bluechip LNG Projects Nearly Fairly Valued 


Name
Insight

Hong Kong

Alibaba
Alibaba IPO/Secondary Listing - The Real IPO Only Begins on the 11th Day Post Listing ​


Alphamab
Alphamab (康宁杰瑞) IPO: Strong R&amp;D Capability and Innovative Platforms 


Ascentage
Ascentage Pharma (亚盛医药) IPO: Too Early for an IPO


Ascentage
Ascentage Pharma (亚盛医药) IPO: Updates and Thoughts on HQP1351 (3rd Gen Bcr-Abl TKI) ​


Ascentage
Ascentage Pharma (亚盛医药) IPO: Some Issues with Banker Forecasts 


Ant Financial
Ant Financial IPO Early Thought: Understand Fintech Empire, Growth &amp; Risk Factors


ByteDance
ByteDance (字节跳动) IPO: How Jinri Toutiao Paves The Way for a Bigger Empire (Part 1)


ByteDance
ByteDance (字节跳动) IPO: Tiktok the No.1 Short Video App for a Good Reason (Part 2)


ByteDance
ByteDance (字节跳动) Pre-IPO: How Has It Done in 1H? 


ByteDance
ByteDance: The Unlisted Company’s Video Apps Leading the Market and Threatening Internet Giants 


Clarity
Clarity Medical (清晰医疗) IPO: Proxy to HK SMILE Surgery Demand


Broad Home
Changsha Broad Homes IPO - Exposure to Prefabricated Construction in China 


China Feihe
China Feihe (中国飞鹤) IPO: New Numbers, New Red Flag, and Demographic Risk 


China Feihe
China Feihe (中国飞鹤) IPO: Thoughts on Valuation 


Helenbergh
Helenbergh (海伦堡) Early Thoughts - The Usual Red Flag - Related Party Transactions


Home Credit
Home Credit Pre-IPO (Part I) - The Positives - Lots to Like 


Home Credit
Home Credit Pre-IPO (Part II) - The Negatives - A Lot More to Dislike 


Home Credit
Home Credit Pre-IPO - Bigger but Not Necessarily Better than Peers 


Home Credit
Home Credit Pre-IPO - Thoughts on Valuation and the Curious Case of Expanding Equity Base 


Huali
Huali University (华立大学) IPO Early Thoughts - Risks Abound 


Hut Chi-Med
Hutchison-China Med (和黄医药) H-Share Listing: MNC Partnerships Endorsed Its R&amp;D Capabilities


Jiumaojiu
Jiumaojiu (九毛九) Pre-IPO Early Thoughts - New Brand Driving Growth 


JS Global
JS Global Lifestyle (JS 环球生活) Early Thoughts - Declaring US$470m Dividend Before IPO 


JS Global
JS Global Lifestyle (JS 环球生活) Quick Note - Questions About Corporate Structure &amp; Reorganization 


JS Global
JS Global Lifestyle (JS 环球生活) Pre-IPO Review - Sometimes, Two Negatives Don't Make a Positive 


JS Global
JS Global (JS 环球生活) PHIP &amp; Thoughts on Valuation - Paid a Premium for a Good Brand 


Megvii

Megvii (旷视) Pre-IPO - Remarkable Growth (Part 1) 


Megvii

Megvii (旷视) Pre-IPO - A Bet on the Future - Segments, Revenue Drivers and Growth Potential 


Megvii

Megvii (旷视) Pre-IPO - The Real Race Is in Research - Founders' Profile and Talent 


MicuRx
MicuRx Pharma (盟科医药) IPO: Betting on Single Drug in the Not so Attractive Antibiotic Segment


Pharmaron

Pharmaron (康龙化成) A+H Listing: A Leading Drug Discovery Company 


Poly Prp

Poly Property Development (保利物业发展) IPO Early Thoughts - Well-Rounded Company 


Renrui
Renrui Human Resources (人瑞人才) Pre-IPO Review - Riding on China's Unicorns 


SinoMab
SinoMab (中国抗体): Pipeline Concentrated on Autoimmune Therapy 


Smoore
Smoore Tech (麦克韦尔) IPO: Hidden E-Cigarette Player Behind the FEELM Technology 


Smoore
Smoore Tech (麦克韦尔) Pre-IPO: 6Y and 1H2019 Financials Show Technology Driven Growth 


Tasly

Tasly Biopharm (天士力生物) IPO: Visible Growth from Approved Drug but Lacks Blockbusters 


TOT Bio

TOT Biopharm (东曜药业) IPO: An Unimpressive Pipeline 


TOT Bio

TOT Biopharm (东曜药业) IPO: Valuation of Core Product TAB008, a Bevacizumab Biosimilar 


Venus

Venus Medtech (启明医疗) IPO: Has the Elements for a Hot Healthcare Deal 


Venus

Venus Medtech (启明医疗) IPO: Technical Comparison of VenusA-Valve and Peers 

India

ASK

ASK Investment Managers Pre-IPO - Riding on a Wave of Wealth 


Aakash Edu
Aakash Education Pre-IPO - Fast Growth in an Attractive Sector


Anmol Ind
Anmol Industries Pre-IPO Quick Take - No Growth, Generous Payments to Founders


Bharat Hotels
Bharat Hotels Pre-IPO - Catching up with Peers 


Bajaj En
Bajaj Energy Pre-IPO - Supposed to Deliver Steady Performance if Only Its Sole Client Would Let It 


CMS Info
CMS Info Systems Pre-IPO - When a PE Sells to Another PE... Only One Gets the Timing Right


Crystal Crop
Crystal Crop Protection Pre-IPO - DRHP Raises More Questions than in Answers


Flemingo 
Flemingo Travel Retail Pre-IPO - Its a Different Business in Every Country


Emami Cem

Emami Cement Pre-IPO - Still in Ramp Up Phase but Emami Shares Pledge Might Lead to an Early IPO 


NSE
NSE IPO Preview- Not Only Fast..its Risky and Expensive


NSE
National Stock Exchange Pre-IPO Review - Bigger, Better, Stronger but a Little Too Fast for Some


Mazagon
Mazagon Dock IPO Preview: A Monopoly Submarine Yard in India with Captive Navy Spending


Mrs. Bector
Mrs. Bectors Food Specialities Pre-IPO Quick Take - Sales for Its Main Segment Have Been Sta


Lodha
Lodha Developers Pre-IPO - Second Time Lucky but Not Really that Much Affordable


Lodha
Lodha Developers IPO: Presence in Affordable Segment Saves Lodha the Blushes in a Sluggish Mkt


Penna Cem

Penna Cement - Aggressive Expansion Plans Even Though Past Performance Has Been Tepid 


PNB Met
PNB Metlife Pre-IPO Quick Take - Doesn't Stack up Well Versus Its Larger Peers


Ujjivan

Ujjivan Small Finance Bank Pre-IPO - Shouldn't Be Forced to List 

Malaysia

QSR
QSR Brands Pre-IPO - As Healthy as Fast Food

The U.S

36Kr

36Kr (36氪) IPO: A Specialized Media Company Struggling to Monetize 


CloudMinds
CloudMinds Inc Early Thoughts - Still Nascent


Ecmoho

Ecmoho (易恒健康) Pre-IPO Review - More Like a Middleman 


FangDD

FangDD (房多多) IPO: Reminiscence of SFUN? 


Huize

Huize (慧择) Pre-IPO - Insurance Agency Masquerading as a Platform Business 


Meten
Meten International Edu (美联国际教育) Early Thoughts - Unclear Strategies


Youdao

Youdao, Inc (有道) Pre-IPO - Weak Conversion Rate Is a Worry 


Q&amp;K

Q&amp;K Intl (青客) IPO: Yet Another WeWork Model that Will Not Work 



ECM Weekly (12 Oct 2019) - ESR, PropertyGuru, Latitude Financial, FangDD, Q&K, Languang Justbon

China

360 Ludashi Holdings Limited operates as a software development company. The Company develops and sells personal computer benchmarking software, smart phone benchmarking monitoring software, and other products. 360 Ludashi Holdings provides services in China.

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360 Ludashi (3601 HK)

Hong Kong IPOs: Lock-Up Expiries (December 2020 Edition)

There exist the "moral hazard" around the expiry of lock-up periods. In 2020, IPO's have on average underperformed the HSI heading into the lock...

David Blennerhassett

ECM Weekly (12 Oct 2019) - ESR, PropertyGuru, Latitude Financial, FangDD, Q&K, Languang Justbon

Aequitas Research puts out a weekly update on the deals that have been covered by Smartkarma Insight Providers recently, along with updates for...

Zhen Zhou, Toh

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