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Hong Kong’s IPO market is unexpectedly coming back to life. It may be a brief revival.
Companies from Anheuser-Busch InBev SA’s Asian unit to Megvii Technology Ltd. aim to raise more than $10 billion selling shares before the year is out. It’s a turnaround that appeared improbable as recently as mid-August, when Hang Seng Index erased its gain for the year amid anti-government protests and concerns over weakening global growth.
Hong Kong’s benchmark stocks gauge bounced 8% since August 13, among the best-performing indexes worldwide in that period, as traders bet that China’s government will try to buoy investor spirits in the run-up to October 1, when the country celebrates 70th anniversary of the founding of the People’s Republic. That’s created a window of opportunity for companies that previously struggled to generate enough investor interest.
Budweiser APAC is the prime example. The unit of AB InBev pulled what would have been world’s biggest initial public offering in mid-July after failing to draw sufficient demand for $9.8bn sale. The company is back with a pared-down $5bn offering and aims to list by the end of September.
The company is seeking to list minus its Australian operations, which the company agreed to sell to Asahi Group Holdings Ltd. for $11.3 billion soon after withdrawing its IPO in July.
Other than a rising stock market, a simple technical reason may account for the company’s haste to try again. A company that seeks to list within six months of its first application doesn’t need to prepare a new set of accounts, meaning Budweiser can just strip the Australian operations from its financials.
Others lining up at the IPO well include Megvii, a Beijing-based artificial intelligence startup that’s seeking $1 billion; consumer lender Home Credit NV, which is targeting as much as $1.5 billion; Chinese sportswear retailer Topsports International Holdings Ltd., which aims to raise about $1 billion; and ESR Cayman Ltd., a logistics real estate developer backed by Warburg Pincus that earlier shelved a $1.2 billion deal.
The resurgence in the IPO market is a tonic for Hong Kong Exchanges & Clearing Ltd., which has faced skepticism over its $36.6 billion bid for London Stock Exchange Group Plc and whose shares have dropped 16% from this year’s high. Hong Kong has slipped in the pecking order of global stock exchanges after topping the rankings in 2018. Companies raised $10.8 billion in IPOs this year through September 13, less than half of the total in the same period last year.
The question is whether there will be enough investor demand to soak up all the stock that an eager and growing group of listing candidates is waiting to thrust on buyers. Meanwhile, Hong Kong’s economy is deteriorating and the protests haven’t gone away. Companies must also consider whether China’s feelgood efforts will extend beyond October 1.
Time may be of the essence for this crowd.
—Bloomberg
Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter