ECM Weekly (21 September 2018) - UK IPO, Volatile Price Movements, and Six Placements

We start this week in the UK first because Aston Martin Holdings (8444762Z LN)'s IPO is set to be the first listing under UK's new IPO disclosure rules. It is exciting and significant to us and everyone Smartkarma because the new rules allow independent analysts to have equal access to management and other company information. Almost a year ago, we were one of the proponents of such a change to the process. You can read our earlier insights on this topic here: Breaking the Bank: Time to End the IPO Rort; and Breaking the Bank: Time to End the IPO Rort - Our Official Response. Thus, we felt like we needed to lend our independent voice for the first IPO under the new rules in Aston Martin Lagonda Pre-IPO Under the New IPO Process - Lots to like Apart from R&D Capitalisation.

Back in the US, the IPO momentum continues as expected with X Financial (XYF US) rallying to a day high of US$20.30 which is about 113% above its IPO price before coming down to earth and closing just 26% above IPO price on the first day. Since then, its share price has been pulling back significantly, down another 8% on Friday morning session. Other non-Asia US IPOs such as Eventbrite Inc (EB US) has also been on a roll, closing some 50+% above IPO price on debut.

In Hong Kong, Meituan Dianping (3690 HK) 's quiet debut was a little bit of surprise. As mentioned in Ke Yan, CFA, FRM 's post-IPO note, Meituan Dianping (美团点评) Post-IPO Lunch-Bite: Near Term Upside and The Liquidity Angle, the adjusted free float is small, representing just 3.5% of the total shares outstanding or 37% of the deal. Perhaps the market is being a little more cautious because the company is trading at about 4.6x FY19E EV/Sales which is on par with Baidu and Ctrip but still significantly lower than its leading China TMT peers such as BABA, and Tencent.

As the US indices rallied past their all-time high and Asia seems to be getting some relief rally in the past week (especially in China and Hong Kong), we are seeing an uptick of activity in the placement space. Just this week alone, we had 6 placements, three in Korea, two in Australia, and one in Singapore.

Notably, most of the placements have been holding up well especially Samsung C&T (028260 KS) . The two shareholders (Samsung affiliates) of Samsung C&T (028260 KS) sold down their entire shareholding in the company, removing part of the overhang that has been weighing down on C&T's share price despite recent earnings momentum. Since the placement was completed, C&T's share price has been on a tear, pricing at 5% discount to Thursday's close and rallying above that to close almost 3% above the previous day close.

Even for Coway's Placement, which we were negative due to the overhang from MBK's remaining stake and the impending ownership by Woongjin Group, managed to claw back its lost grounds to close above its placement price on Friday despite collapsing below it on Thursday's close.

For next week, we are hearing that Midea Real Estate (MRE HK), the property development arm of Midea Group Co Ltd A (000333 CH), and Jiangxi Ganfeng Lithium (002460 CH) will be opening its book next week. Osotspa Co Ltd (0227009Z TB) has also started its bookbuild and we will be covering the IPO next week.