Corporate Financing Analysis - US Investors Still Interested In Chinese Floats (In US) - 08 JAN 2018


In line with our view that the flow of deals by Chinese companies listing on US exchanges will continue to strengthen over the coming quarters ( see ' Chinese Floats Returning To The US In Growing Numbers ' , November 9 2017), we highlight that two final cross-border deals were completed during the final week of 2017. In the pre-Christmas rush before the holiday season began, online consumer lending platform LexinFintech Holdings and independent online marketing technology platform iClick Interactive both successfully tapped US equity capital market (ecm) for fresh funds. Acutely aware that the US equities arena is on fragile ground at present, with a collapse in share prices predicted by BMI to be imminent in Q118 ( see 'US IPO Market Continuing To Break New Records, But Downturn Awaits', November 15 2017), and that recent Chinese lending IPOs have been poorly received by US investors, both firms chose to price their stock at the lower end of their indicative ranges to ensure their listing success. The strategy paid off, with the aftermarket performance of both stocks impressing - albeit at the expense of leaving plenty of cash 'on the table'.

LexinFintech A Hit With Investors

Focusing on the larger of the two deals, we highlight that Shenzhen-headquartered LexinFintech raised a modest USD108mn (iClick tapped investors for as little as USD30mn) after pricing 12mn ADS at USD9 a piece (the low end of a USD9-11 indicative range) on the Nasdaq bourse, a starting point which saw its share price sky-rocket by as much as 19% in the one-day aftermarket and by 58% as of the end of the first week of listing, fuelled by the firm's strong growth prospects. Such lucrative returns suggest that Beijing's recent regulatory crack down on peer-to-peer (P2P) lending - which continues to grow rapidly and expanded by as much as 68.6% y-o-y in July 2017 - was not enough to put potential investors off the deal, which Goldman Sachs (Asia), BofA Merrill Lynch, Deutsche Bank and China Renaissance served as acting lead managers for. iClick Interactive, meanwhile, saw its stock climb by 12.5% during the week of its debut. While LexinFintech excelled, we note that iClick Interative's debut performance was almost in line with the 12% average debut return recorded by all floats in the US during the 2017 full-year period - according to Renaissance Capital data. Moreover, the deals have helped the combined value of proceeds from first time share sales on US exchanges top USD35.5bn in 2017 across 160 deals.

Enjoy It While It Lasts!
US IPO Activity By Deal Value, USDbn
Source: BMI, Renaissance Capital

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