ZKH Group Holdings (ZKH proposed) of Shanghai is leading the IPO Calendar this mid-December week when the Fed is in focus.
Fed Chairman Jerome Powell and his FOMC colleagues are expected to hold interest rates steady at their two-day meeting, according to The Wall Street Journal. The Fed meeting begins today (Tuesday, Dec. 12, 2023) and ends Wednesday afternoon (Dec. 13, 2023). The Fed officials’ rate forecast, which will be released Wednesday after their meeting, is likely to show that “most expect to cut rates somewhat next year,” The WSJ reported.
Lower U.S. interest rates would set the stage for a healthier IPO market in 2024 following two slow years. The Fed’s last rate increase was in July, when it raised the benchmark federal funds rate to a 22-year high between 5.25 percent and 5.5 percent.
ZKH Group launched its $66.0 million IPO late Friday afternoon (Dec. 8) for pricing Thursday night (Dec. 14) to start trading Friday, Dec. 15, 2023, on the New York Stock Exchange. The holding company, incorporated in the Cayman Islands, is offering 4.0 million American Depositary Shares (ADS) at $15.50 to $17.50 to raise $66.0 million. ZKH Group’s trade date of “Friday the 15th” for its NYSE debut coincides with the date, Dec. 15, when the IPO market typically begins its seasonal holiday break.
Deutsche Bank Securities, China Renaissance and CICC are the joint book-runners.
Heat From The IPO Pipeline
ZKH Group is going public at a time when the IPO Pipeline is heating up. Hornbeck Offshore Services, Inc. (HOS proposed), which provides water transportation to offshore drilling platforms, filed plans last week for a $100 million IPO in an S-1 dated Dec. 7, 2023. The profitable Louisiana oilfield services company is backed by Ares Management Corp., a private equity company. J.P. Morgan and Barclays are the joint lead book-runners.
Four SPACs – aka blank check companies – filed to go public last week with combined estimated proceeds of $585 million. Blue Room Acquisition Corp. (IBLUU proposed) disclosed plans for a $200 million SPAC IPO on Tuesday (Dec. 5, 2023) with Maxim Group as the sole book-runner. TechyBird Acquisition Corp. (TKBDU proposed) filed an S-1 for a $60 million SPAC IPO with Spartan Capital as the sole book-runner, while FG Merger III Corp. (proposed symbol to be announced) filed an S-1/A disclosing terms for a $150 million SPAC IPO with ThinkEquity as the sole book-runner – with both filings disclosed on Wednesday (Dec. 6, 2023). Legato Merger Corp. III (LEGT.U) filed an S-1 on Thursday (Dec. 7, 2023) for a $175 million SPAC IPO with BTIG as the sole book-runner.
On the flip side, one big IPO was withdrawn – as expected – on Monday, Dec. 11, 2023: Carmot Therapeutics (CRMO proposed) withdrew its plans for a $100 million IPO, SEC filings showed. In early December, the news broke that Roche had agreed to buy Carmot Therapeutics for $2.7 billion.
Three IPOs on the Runway
ZKH Group’s IPO is one of just three deals on this week’s IPO Calendar with a firm trade date. One of those three deals is INNO Holdings (INHD), a Texas cold steel framing company that priced its $10 million IPO last week (Monday, Dec. 4, 2023) and took the road less traveled. INNO’s stock is expected to start trading today (Tuesday, Dec. 12, 2023) on the NASDAQ. The third deal – the $6.1 million unit IPO of Docola Inc. (DOCO/ DOCOW proposed), a healthcare platform startup – is a carry-over from last week. Docola’s IPO is scheduled to price tonight (Tuesday, Dec. 12, 2023) to trade Wednesday (Dec. 13) on the NASDAQ.
IPO bankers expect to raise about $82.1 million, if all three of these IPOs get done this week.
Forecast of A Mid-December Flurry
This week’s IPO Calendar shows the possibility of a mid-December flurry. Eight small IPOs are on the roster with pricing dates listed as “the week of Dec. 11, 2023.” Those deals could raise nearly $103 million in combined IPO proceeds. All are NASDAQ listings.
The Street expects that a few of these deals may get done between now and the end of the year. Wall Street is set for a five-day work week next week. But the reality is that most banking and trading desks will be more thinly staffed in the countdown to Christmas, which falls on Monday (Dec. 25, 2023) this year.
Among the deals to watch on the flurry list are Chi Ko Holdings (CKHL proposed), the Cayman Islands parent of a profitable Hong Kong construction contractor, and Linkage Global (LGCB proposed), the Cayman Islands parent of a profitable Japanese e-commerce services company.
EF Hutton is the sole book-runner of both deals.
Insiders Back ZKH Group’s IPO
Two major shareholders in China’s ZKH Group have indicated an interest in buying an aggregate of up to $15.0 million – or nearly 23 percent of the stock in the $66.0 million IPO. The Canadian Pension Plan Investment Board is in for buying up to $10.0 million of stock in the IPO, while Tencent Mobility Limited is in for buying up to $5.0 million of stock in the IPO, according to the prospectus.
ZKH Group Ltd., founded in 1998, is the parent of a Shanghai-based business that offers MRO procurement services in China through two platforms – ZKH for enterprise customers and GBB for micro businesses. ZKH Group’s platform services are also available through its mobile app, Weixin Mini-Program. “MRO” stands for “maintenance, repair and operation” and refers to materials used for “maintenance, repair and operation purposes that do not directly constitute final products,” the prospectus says.
The company’s operating business provides a digital procurement network backed by 30 distribution centers, 96 transit warehouses and 4,000 smart vending machines to supply its 64,000 industrial customers with spare parts, chemicals, manufacturing parts, general consumables and office supplies, according to the prospectus. (These figures are as of Sept. 30, 2023.) ZKH Group’s inventory covers 32 product lines, 17.2 million SKUs and 24,000-plus suppliers.
The company is not profitable. ZKH Group reported a net loss despite revenue of $1.2 billion for the 12 months that ended Sept. 30, 2023, the prospectus shows.
(For more information about these companies, please check the IPO Calendar and the individual IPO Profiles found on IPOScoop.com’s website.)
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