Strikeforce Mining, Swire Lead Delays of Hong Kong Initial Public Offers
Strikeforce Mining & Resources Plc and Swire Properties Ltd. may not be alone in delaying initial public offerings in Hong Kong after the Hang Sang Index posted its biggest weekly drop since November, according to Fulbright Securities Ltd. and Louis Capital Markets HK Ltd.
Strikeforce, the Russian molybdenum producer controlled by billionaire Oleg Deripaska, will delay taking orders for its IPO in Hong Kong until equity markets have stabilized, a person with knowledge of the decision said May 8. Swire Properties shelved its plan to raise as much as HK$20.8 billion ($2.7 billion) two days earlier, while people familiar with the decision said last week that China Tian Yuan Mining Ltd. was pushing back its sale.
The postponements came as Europe’s widening debt crisis and a breakdown in American trading systems sparked a slump in equity markets and spurred companies from Atlanta-based Americold Realty Trust to GSW Immobilien AG of Berlin to shelve IPOs. Declines by United Co. Rusal and L’Occitane International SA after their initial offerings in Hong Kong may deter more companies from listing, according to Louis Capital Markets.
“Who at the moment is going to dare to have an IPO in Hong Kong?” said Francis Lun, general manager at Fulbright Securities in Hong Kong. “Companies want to raise money selling shares, but the market is so volatile there simply isn’t the appetite from institutional investors.”
Hong Kong’s Hang Seng Index fell 5.6 percent last week, the biggest retreat since the period ended Nov. 27. The MSCI World Index of equities in 23 developed countries tumbled 8.3 percent, erasing its 2010 advance, while waves of electronic selling helped push the Dow Jones Industrial Average down as much as 9.2 percent on May 6, the biggest drop since the crash of 1987.
Swire Properties’ parent company Swire Pacific Ltd. said in a statement to the Hong Kong stock exchange last week that it decided to postpone the IPO after considering “the deterioration in market conditions.” China Tian Yuan, the largest privately owned iron ore producer in the northern province of Hebei, delayed its offering after U.S. stocks fell the most in a year on May 6.
L’Occitane, the first French company to hold an IPO in Hong Kong, slid 4.5 percent in its first day of trading on May 7, following the U.S. slump. Moscow-based Rusal, which is also controlled by Deripaska and completed the first initial offering by a Russian company in Hong Kong, has retreated 26 percent since its January listing.
The decision to delay Strikeforce Mining’s sale while the market is weak isn’t surprising given Rusal’s drop, according to Ben Collett, head of equities at Louis Capital Markets.
“If I were advising companies on an IPO in Hong Kong at the moment, I’d say leave it three to six months,” he said. “You want to hold an IPO when the market is rising. The appetite for risk has reduced dramatically.”
Strikeforce Mining, or SMR, had planned to start taking orders from institutions as early as this week, and the company was seeking to raise as much as $200 million, a person with knowledge of the plan said on May 3.
SMR produces more than 6 percent of the global supply of ferro-molybdenum, which is used to make stainless steel. The company also owns a stake in Buka Mining, which holds a development license for gold, silver and copper deposits in Mongolia, according to its Web site.
Amid last week’s postponements, HCA Inc., the hospital chain bought four years ago in a $33 billion leveraged buyout led by New York-based KKR & Co. and Bain Capital LLC of Boston, filed to sell as much as $4.6 billion in shares. The Nashville, Tennessee-based company’s U.S. IPO would be the biggest since Visa Inc. of San Francisco sold $19.7 billion in March 2008.
Agricultural Bank of China Ltd., the nation’s third-largest lender by assets, is planning to sell as much as 18 percent of itself in an IPO in Hong Kong and Shanghai, two people with knowledge of the matter said this month. The Beijing-based bank will raise at least $30 billion, the Beijing Times reported last month, making it the world’s biggest initial sale ever.
European Union governments may agree to an emergency lending mechanism worth around 500 billion euros ($645 billion), according to a government official familiar with the talks, to help stop the sovereign-debt crisis and stabilize markets after credit downgrades of Greece, Portugal and Spain sent the euro to a 14-month low.
“We really have to see how the markets fare in Europe, whether the contagion over debt can be halted at just Greece,” Fulbright Securities’ Lun said. “If that can be stopped in its tracks, then maybe the appetite for IPOs in Hong Kong can return in a matter of weeks.”