ZTO Express Inc., the Chinese delivery service that gets about three-quarters of its business from Alibaba Group Holding Ltd., is following its top customer to the U.S. stock market with this year’s biggest initial public offering.
The company’s USD1.4 billion share sale is the most a Chinese company raised in New York since Alibaba’s record $25 billion offering in 2014. The deal may mark an inflection point after a string of mainland companies have sought to abandon their U.S. listings and move trading back home, where stocks are commanding higher multiples. It will also test U.S. investor demand at a time when others are going public through reverse mergers, or backdoor listings, on the Shenzhen exchange.
Such deals – when a private firm purchases a public “shell” to take over its listing – have proliferated in China as the regulator made it difficult for companies to gain approval for IPOs in Shanghai. The waiting list for new mainland equity offering approvals exceeds 800, more than China’s total listings over the last five years, according to the China Securities Regulatory Commission website and data compiled by Bloomberg.
“There’s an epic traffic jam of companies seeking to IPO on Chinese stock exchanges,” said Peter Halesworth, founder of Heng Ren Investments, a Boston-based firm that invests in Chinese companies listed overseas. “If they can’t cut the line to sell stock to raise funds in China, they may increasingly hop a plane to the U.S. to tap the markets.”
ZTO sold 72.1 million American depositary shares at $19.50 apiece, after offering them for $16.50 to $18.50 each, according to a Wednesday statement distributed by PRNewswire. The ADRs will start trading Thursday on the New York Stock Exchange under the symbol ZTO. Morgan Stanley and Goldman Sachs Group Inc. led the offering.
The rewards for a mainland listing have proven worth the wait for some. While the average size of Chinese IPOs so far in 2016 is only about 654 million yuan ($96.5 million), all the companies that went public in China this year have posted gains, rising nearly four-fold on average. Bloomberg
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