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Chinese companies race to list in Hong Kong before Ant's mega IPO

ZTO Express, Zai Lab and Boazun look to raise a combined $3bn

Chinese companies are looking to offer shares before Ant Group's IPO sucks up liquidity. (Source photos by AP and Reuters)

HONG KONG -- Hong Kong is gearing up for at least three secondary share offerings by U.S.-listed Chinese companies looking to raise a combined $3 billion in the next 10 days -- before liquidity gets sucked up by Ant Group's $30 billion IPO in early October.

Delivery company ZTO Express has filed a prospectus to sell 45 million shares for as much as 268 Hong Kong dollars a piece, with an eye to raising up to $1.6 billion. Meanwhile Biotech company Zai Lab is looking to raise about $1 billion, while online retailer Baozun is aiming for around $500 million. All three are set to open up for share subscriptions over the next week, three people familiar with the matter said.

A fourth company, hotel operator Huazhu Group, is already set to price its secondary offering at HK$297 a share -- a 2.1% discount to its Monday closing on Nasdaq -- to raise about $785 million. While the company's initial guidance indicated a maximum price of HK$368, the U.S.-listed shares have dropped almost 10% since the offering was opened in Hong Kong amid an equity market sell-off. The company on Monday reported a 3% decline in second-quarter revenue from the previous three months, though its net loss narrowed.

"Recent offerings have shown investor appetite is very much intact, and we had better go now to generate enough attention and orders, as investors would like to be cashed up before Ant launches," a source related to one of the offerings said. "If a deal is opened this week, investors have the confidence that we can price, refund and list the company well before Ant."

The IPO by Ant, an affiliate of Alibaba Group Holding, is shaping up to be the largest in the world, and is scheduled to open for subscriptions in Hong Kong and on Shanghai's Nasdaq-style STAR Market in early October, subject to regulatory approval. The STAR Market has scheduled a listing hearing for the morning of Sept. 18, while the Hong Kong exchange is likely to hold a listing next week, sources have said.

Ant's IPO is likely to take subscriptions after Chinese public holidays for the mid-autumn festival between Oct. 1 and Oct. 8, subject to approvals. The company's market debut is likely in the third or fourth week of October. Preliminary discussions with potential investors have indicated that most are comfortable with a valuation above $250 billion. Some early investors are likely to sell a part of their holdings in the Hong Kong leg, as only new shares are allowed to be sold through mainland IPOs.

Ant's offering is set to draw investors eager to get a stake in the world's most valuable fintech company, which in addition to dominating China digital payments, has tied up with partners across Asia and evolved into a virtual financial services mall for everything from loans and mutual funds to insurance policies and travel bookings.

Ant has skipped New York for its IPO amid mounting tensions between Beijing and Washington, including U.S. authorities' move to kick Chinese companies off of American exchanges if they do not grant regulators access to their audited financial records.

Chinese companies have declined to open their books to American regulators, citing domestic laws that ban such access on the grounds that the statements could contain state secrets.

Since November last year, four companies -- Alibaba, online retailer JD.com, game developer NetEase and Yum China, the KFC operator on the mainland -- have raised more than $20 billion in Hong Kong.

A further 35 Chinese companies listed in the U.S., including search engine giant Baidu, qualify for listing in the city based on the Hong Kong stock exchanges rules.

 

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