The IPO Buzz: Diving for Details

On Wednesday, Oct. 31, 2018, CNFinance Holdings (CNF proposed), a major provider of home equity loans in China, filed an amendment to its IPO prospectus with the U.S. Securities and Exchange Commission. It was noteworthy.

The company changed underwriters, announced pricing terms and disclosed that non-insider investors were looking to buy into the IPO. Most readers focused on the change of managers and failed to read the new information about investors’ interest.

The Background

CNFinance originally filed plans on July 11, 2018, for an IPO to raise $200 million. The joint-lead managers were J.P. Morgan and Credit Suisse.

Fast forward to last Wednesday: CNFinance posted proposed pricing terms of 6.5 million American Depositary Shares (ADS) at $7.50 to $8.50 each to raise $52 million.

The deal is scheduled to be priced Tuesday evening, Nov. 6th, to trade on Wednesday morning, Nov. 7th.

Now here was the surprise. The new joint-lead managers were Roth Capital Partners and Shenwan Hongyuan Securities. Most people focused on the switch to Roth from J.P. Morgan and Credit Suisse. But it’s worthwhile to read further.

What People Missed

In the new prospectus: “Several investors have each indicated an interest in purchasing over 5% (percent) of the ADSs, or up to US$60 million of the ADSs in aggregate, in this offering at the initial public offering price and on the same terms as the other ADSs being offered. Such investors are not our existing shareholders, directors or officers.”

It is very unusual to post a list of non-insiders indicating an interest in any offering. In this case, non-investors were looking to buy up to $60 million of a $52 million IPO. You might say the deal was oversubscribed.

Deja Vu

However, this is not the first time that investors have piled into Chinese IPOs. Let’s take a look. Two recent cases in point: Pintec Technology Holdings (PT) and Studio City International Holdings (MSC).

Pintec, a Chinese online platform to deliver financial services such as loans, wealth management and insurance, priced its IPO of 3.725 million ADS at $11.88 each on Wednesday evening, Oct. 24, 2018. Insiders purchased 3.93 million ADS of the offering. That was more than what was offered. The ADS closed their opening day, Oct. 25, 2018, at $12.49. On Friday, Nov. 2, 2018, Pintech closed at $11.65, DOWN 1.94 percent from its IPO price.

Studio City International Holdings, based in Hong Kong, is a world-class gaming, retail and entertainment resort in Cotai, Macau. On Oct. 17, 2018, Studio City priced its IPO of 28.75 million ADS at $12.50 each. Insiders purchased 25.55 million ADS, or 88.9 percent, of the IPO. The ADS closed their opening day of trading at $15.50 each. On Friday, Nov. 2, 2018, Studio City closed at $25.48, UP 103.8 percent from its IPO price.

November’s Second Week

The IPO Calendar has just one deal – a “blank check” IPO – for the week of Nov. 12th. But anything can happen when the SEC’s filing window opens again for business on Monday morning.

Stay tuned.

Disclosure: Neither the author nor anyone else on the IPOScoop.com staff has a position in any stocks mentioned, nor do we trade or invest in IPOs. The author and IPOScoop.com staff do not issue advice, recommendations or opinion.