Three Chinese companies plan to seek nearly $3 billion from Hong Kong investors this month, according to people familiar with the matter, adding to a surge of initial public offerings in coming weeks just as the market shows new signs of flagging.
Shanghai Pharmaceuticals Holding Co. plans to seek up to $2.22 billion through a May 20 listing, said people familiar with the matter. It joins two others now expected this month, according to other people: Chinese chemical fiber manufacturer Billion Industrial Holdings Ltd., which is seeking up to $449 million, and flooring maker China Flooring Holding Co., which is seeking up to $300 million.
The new entrants would join Glencore International AG, which could reap at least $2.2 billion in Hong Kong out of a total $12.1 billion offering split between the Chinese territory and London.
The new offerings are coming even as some investors lose confidence in new share offerings following a spate of weak post-listing performances. Hong Kong has an unusually large proportion of retail investors active in the IPO market, and they tend to be swayed more by sentiment toward new issues as a whole than are institutional investors.
"IPO investors are selective about what they're buying since many IPOs haven't performed well this year," said Kingston Lin, research director at Fulbright Securities. "They will continue to be selective this quarter, with investors preferring market leaders."
Friday, Yuanda China Holdings Ltd., a Chinese maker of curtain walls, shelved a plan Friday to raise up to $536.2 million in a Hong Kong IPO and said it may relaunch the deal but raise less money. It didn't give a reason for the rejigged IPO, but people familiar with the situation blamed weak demand from investors for the real estate-linked company. China has been cooling the growth of the country's property prices in the past year, and that has hurt demand for stocks in that sector.
Also on Friday, Hui Xian Real Estate Investment Trust—the first yuan-denominated IPO outside mainland China—fell sharply on its Hong Kong debut, closing Friday at 4.75 yuan ($0.73), down 9.4% from its 5.24 yuan IPO price. Shares ended Tuesday up 4.6% at 4.97 yuan, still below its IPO price.
Shanghai Pharmaceuticals began meeting with investors and accepting orders on Tuesday. The company, China's largest listed drug maker by revenue, plans to sell 664 million shares in an indicative price range of 21.80 to 26 Hong Kong dollars (US$2.81 to US$3.35) per share, the people familiar with the situation said Tuesday.
To attract investors' interest, the drug company has locked in $550 million from four cornerstone investors, one of the people said. Cornerstone investors swap the certainty of receiving all the shares they requested during the offering in exchange for not selling the shares for a predetermined time period. The company going public wants the high-profile investors to give others confidence in the offering.
Singapore state investment company Temasek Holdings Pte. Ltd. is investing $300 million in Shanghai Pharmaceuticals, Malaysian tycoon Quek Leng Chan's property-to-financials conglomerate Guoco Group Ltd. is buying $150 million worth of shares and U.S. pharmaceuticals giant Pfizer Inc. and Bank of China Investment Ltd. have each agreed to buy $50 million worth of shares each, the person said. These investors won't be able to sell the shares for one year.
Shanghai Pharmaceuticals plans to use the proceeds from its IPO to buy pharmaceuticals manufacturers, to expand its distribution networks and for working capital, according to a term sheet seen by Dow Jones Newswires earlier.
Wednesday, Billion Industrial and Glencore are set to begin their sales pitch to investors and accepting orders. Billion plans to sell 574.75 million shares at an indicative price range of HK$4.53-HK$6.08 per share, and share trading is set to begin May 18, according to a person familiar with the offering. Glencore is expected to announce its cornerstone investors and price range on Wednesday,
Meanwhile, Fujian-based Billion Industrial is planning to sell 574.75 million shares at an indicative price range of HK$4.53 to HK$6.08 per share, another person familiar with the deal said.
The company manufactures and sells fiber products mainly to domestic and overseas textile enterprises, according to its website.
China Flooring, which is planning to list in Hong Kong at the end of May, plans to use the proceeds from the IPO to expand its distribution network in China, the same person said. Its advisers are HSBC Holdings PLC, Morgan Stanley and Standard Chartered Securities. It isn't known when ordertaking will begin.
Credit Suisse Group, Deutsche Bank AG, Goldman Sachs Group Inc. and China International Capital Corp. are handling Shanghai Pharmaceuticals's IPO, while Bank of America Merrill Lynch, CCB International (Holdings) Ltd., and UBS AG are handling Billion's IPO, the people said.