JD Health IPO Adds to Hale and Hearty Hong Kong Market
25 November 2020 - 9:29PM
Dow Jones News
By Joanne Chiu and Quentin Webb
Hong Kong is having a standout year for stock listings, despite
political turmoil and the derailment of the world's largest initial
public offering.
On Wednesday, the telemedicine arm of Chinese e-commerce giant
JD.com Inc. kicked off a $3 billion-plus IPO in Hong Kong. The deal
by JD Health International Inc. will help lift proceeds from Hong
Kong IPOs and secondary listings to a 10-year high, even after the
sudden suspension of Ant Group Co.'s blockbuster listing earlier
this month.
The city's capital markets continue to draw funds from global
investors despite strained relations between Beijing and
Washington, China's imposition of a new national-security law in
Hong Kong in June, and other complications such as the Trump
administration's attempt to bar American investors from holding
stocks of some Chinese companies.
Hong Kong is the preferred listing venue for many Chinese
companies, including technology and health-care startups, and has
seen dozens of IPOs from China this year. It has also hosted
several secondary listings by U.S.-traded Chinese companies.
Beijing-based JD Health on Wednesday began taking orders for a
$3.1 billion to $3.5 billion IPO, according to a term sheet seen by
The Wall Street Journal. With Ant's listing delayed, this would be
Hong Kong's largest IPO this year, according to Refinitiv.
Property-management companies backed by developers China
Evergrande Group and China Resources Land Ltd. are separately
seeking to raise a combined total of as much as $3.6 billion, ahead
of market debuts in early December, filings showed.
The planned listings are set to push fundraisings from IPOs and
secondary listings in Hong Kong above last year's total to the
highest since 2010, when such share sales like this raised more
than $57 billion, according to Refinitiv. More than 110 companies
have already raised $39.1 billion through new listings this
year.
The flurry of share sales is good news for major U.S. banks,
which have secured senior roles on many of the deals. It is also a
boon for the Hong Kong stock exchange, after it revamped its rules
in recent years to accommodate unprofitable companies and those
with unconventional shareholding structures. Shares of the city's
exchange operator briefly hit a record intraday Wednesday, but
later fell back.
For companies seeking to raise capital from international
investors, "Hong Kong is still a very attractive place," said Frank
Tsui, senior fund manager at Value Partners, an independent
asset-management firm based in the city. "I'm not seeing a slowdown
in the IPO pipeline."
Mr. Tsui said Hong Kong had been buoyed by the exchange's
reforms as well as the "massive global liquidity" supplied to
markets by the Federal Reserve and other central banks. Hong Kong
was likely to remain a competitive financial center in the medium
term, he said, at least until China's onshore stock markets were
fully open to foreign investors.
The pandemic has increased investors' interest in certain
health-care businesses, and fundraising by Chinese health-care
companies has hit records this year.
JD Health said it runs China's largest online pharmacy by
revenue, organizes medical bookings and offers online consultations
with doctors.
It made a net loss of 5.4 billion yuan, the equivalent of $819
million, in the six months to June, as expenses rose and it booked
a charge for the change in the fair value of convertible preferred
shares. Revenue rose 76% year over year to 8.8 billion yuan, most
of which came from sales of products like over-the-counter
medicines, prescription drugs, contact lenses and medical
devices.
JD Health is offering nearly 382 million shares, with an
indicative price range of 62.80 Hong Kong dollars to HK$70.58
each--the equivalent of $8.10 to $9.10. That represents 12.2% of
its enlarged share capital and will value the company at up to
$28.5 billion.
Six cornerstone investors, including investment firms BlackRock,
Tiger Global and Hillhouse, will buy up to $1.35 billion of stock
wherever the deal is priced. The IPO could increase to $4 billion
if underwriting banks exercise an option to buy 15% more
shares.
JD Health plans to fix the offer price on Dec. 1 and list on
Dec. 8. The deal is being led by units of Bank of America Corp.,
Haitong International Securities Group Ltd. and UBS Group AG.
Write to Joanne Chiu at joanne.chiu@wsj.com and Quentin Webb at
quentin.webb@wsj.com
(END) Dow Jones Newswires
November 25, 2020 05:14 ET (10:14 GMT)
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