Sun Art Delays Debut in Hong Kong on Prospectus Error After $1 Billion IPO

Sun Art Retail Group Ltd., China’s largest hypermarket operator, delayed its trading debut in Hong Kong because of an error in its share-sale prospectus.

The retailer, which raised HK$8.2 billion ($1.1 billion) in an initial public offering this month, plans to list July 27 instead of today as scheduled, according to a statement to the city’s stock exchange today. Historical earnings-per-share figures in the prospectus failed to reflect a stock split that took place before the IPO, it said.

Sun Art, backed by France’s Groupe Auchan SA, dropped to HK$7.60 in over-the-counter gray market trading at 5:15 p.m. in Hong Kong yesterday, from as high as HK$8.28 earlier, according to the website of Phillip Securities Group. An “accident” caused trading to be suspended, according to a statement on the website. Sun Art sold shares at HK$7.20 apiece in the IPO, the top end of a range marketed to investors.

“The uncertainty is still around, so it makes sense that the gray market price dropped,” Nelson Yan, an investment manager at Mayfair Pacific Financial Group in Hong Kong, said yesterday.

Due Diligence

Ruentex Industries Ltd. (2915) and Ruentex Development Co., part owners of Sun Art, fell in Taipei trading. Ruentex Development dropped as much as 3.8 percent to NT$40.20 before trading at NT$41.2 as of 11:44 a.m. local time while Ruentex Industries Ltd. lost as much as 5.1 percent to NT$64.70 before trading at NT$66.1.

Hong Kong’s markets regulator plans to review how banks underwrite IPOs, after its former head, Martin Wheatley, said due diligence in offerings had at times been “inadequate.” The Securities and Futures Commission said June 8 that it may begin consultation on making sponsors legally liable for statements in their clients’ prospectuses in the third quarter.

Sun Art received orders for more than 40 times the stock available to retail investors, according to a statement from the company yesterday. Net proceeds from the share sale will be about HK$8 billion ($1 billion) the company said yesterday. About half of that will be used to open stores in China, where it has 196 hypermarkets using both the Auchan and RT-Mart brands.

Technical Errors

Citigroup Inc., HSBC Holdings Plc and UBS AG (UBSN) are managing the offering as global coordinators, and BNP Paribas SA, China International Capital Corp., Goldman Sachs Group Inc. and Morgan Stanley are joint bookrunners, according to the prospectus. KPMG was the auditor for the IPO.

Sun Art isn’t the first company this year to get tripped up by a technical error. Dragon Crown Co Holdings Ltd., which started trading on June 10, misprinted an earnings-per-share number in its IPO prospectus, according to a May 31 filing to the Hong Kong stock exchange.

Milan Station Holdings Ltd., which debuted on May 23, misstated a condition for measuring the company’s share capital in its IPO prospectus, a May 18 filing to the stock exchange showed. Goldman Sachs Group Inc. (GS) said in April it would buy back at a premium warrants that were suspended from trading in Hong Kong because of a misprinted settlement formula.

Sun Art last year had a 12 percent market share in China’s hypermarket industry, according to data from London-based researcher Euromonitor International. Wal-Mart Stores Inc. ranked second with 11.2 percent, China Resources Enterprises Co. had 9.8 percent and Carrefour SA 8.1 percent, according to Euromonitor.

To contact the reporter on this story: Fox Hu in Hong Kong at fhu7@bloomberg.net

To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net

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