ECM Weekly (15 November 2020) - JD Health, Kuaishou, CR Mixc Life, Antengene, and Placements!

Much has happened since Ant Group (6688 HK)'s IPO got pulled so this will be a lengthy weekly note.

Thanks to The Wall Street Journal (WSJ), we now know that Xi Jinping personally cancelled Ant's IPO due to Jack Ma's brazen comments a few weeks earlier. This doesn't look good, especially with news of China’s antitrust watchdogs publishing draft rules targeting monopolistic practices of digital platforms.

The draft rules aim to prevent anti-competitive behavior among online platforms, collaboration on customer data, eliminating smaller payers, and etc. It also mentioned greater regulatory oversight of VIE which will obviously impact upcoming China IPOs and listed companies alike since most of them are built upon VIE structure to raise capital from foreign investors. The Chinese government has not officially legalized such a structure and could use this chance to reign in their control over these companies.

Well, it's 2020, just when you think the bad news end here, there's more.

Hong Kong's Securities and Futures Commission (SFC) was said to be planning new code of conduct for equity and debt deals. This may see the introduction of framework to calculate fees for bookrunners. Companies looking to list may also need to secure underwriting syndicates earlier to limit non-bookrunners from pitching shares to investors to show they have demand in a bid to secure the bookrunner role. There are also potential changes to allocation rules, specifically, regarding the cornerstone structure in HK IPOs where cornerstone investors can secure guaranteed (usually larger) allocation in an IPO in exchange for a six-month lock-up period. For now, nothing is set in stone and, to be fair, this isn't necessarily bad since the goal here is to tighten supervision.

Aside from Ant's IPO "hiccup" earlier, Hong Kong IPO activity is still looking strong, for now. JD Health (JDH HK), Blue Moon Group Holdings (BMG HK), and Evergrande Services was said to have gotten their approval this week and will start premarketing in the coming week. Netjoy (NETJOY HK) was also said to be seeking approval this week but we have yet to get confirmation of its approval.

• JD Health (京东健康) Pre-IPO - Peer Comparison - It's a Close Fight and Competition Is Intensifying
• JD Health (京东健康) Pre-IPO - Assumptions and Valuations
• Blue Moon Group Pre-IPO - Initial Thoughts on Valuation
• Blue Moon Group Pre-IPO - The Positives - Dominant Market Share, Strong Online Sales
• Blue Moon Group Pre-IPO - The Negatives - Flagging Offline Sales, Not Really a Primary Raising
• Blue Moon: No. 1 But No Exclusive Advantage, Observation on the Ground
• Blue Moon Group Pre-IPO - Online Reviews and Peer Comparison
• Netjoy (云想科技) Pre-IPO: Growth Stalled for the Short Video Marketer
• CR Mixc Lifestyle Services (华润万象生活) Pre-IPO - SOE-Linked Parentage Didn’t Help

Antengene (6996 HK) launched its IPO this week and Ke Yan, CFA, FRM shared his thoughts on valuation.

• Antengene (德琪医药) IPO: Buy the Team

We also covered recently filed Beijing Kuaishou Technology Co Ltd (1496219D CH) which is expected to raise US$5bn.

• Kuaishou Technology Pre-IPO - The Positives - Hot Segment, Fast Growth
• Kuaishou Technology Pre-IPO - The Negatives - Ample Doubts Remain

In Australia, it's a rare treat to get two IPOs almost at the same time. Dalrymple Bay Infrastructure and Nuix have set their terms for IPO and will begin their bookbuild process soon.

There will also be a few trading debuts next week. Jinke Smart Services (9666 HK), Shinsun Holdings (2599 HK), and Sunac Services (1516 HK) will debut in Hong Kong on Tuesday, Wednesday, and Thursday, respectively, followed by Gland Pharma (7172753Z IN) on Friday in India.

Last but not least, for placements, there were deals across different countries and they were mostly secondary share sale. There is Ascendas Real Estate Investment Trust (AREIT SP) private and preferential placement in Singapore to buy office properties and data centres, Japan Airlines (9201 JP) primary placement to shore up balance sheet, selldowns by shareholders in Jiumaojiu (9922 HK), Shenzhou Intl Group Holdings (2313 HK), BDO Unibank Inc (BDO PM) and VGI PCL (VGI TB).

Out of these, the one that stood out (which happened to be the only one we chose to avoid) was VGI's placement which closed higher the day after its done despite its massive deal size (relative to ADV) and deep discount (11%) to last close. The deal was said to be driven by reverse enquiries and was well covered by institutional investors.

• Japan Airlines Placement - Given the Uncertain Outlook, Might Need Further Correction
• Ascendas REIT Placement - Multiple Acquisitions to Be Made, Starting From US Office Properties
• Shenzhou International Placement - Conditioned for Selldowns
• Jiumaojiu (九毛九) Placement - Founder and Employees Selling
• BDO Unibank Placement - Wide Discount to Account for the Large Deal Size
• VGI Global Placement - Biggest Block Ever by BTS