Timing issues
Dalian's share issue could be poorly timed
Dalian, north China's largest operator, is the latest port to test the murky capital financing markets with a listing on the Shanghai stock exchange.
Already a firm fixture on the Hong Kong stock exchange, Dalian is to launch up to 1.5bn shares, made up of 798.7m shares sold through the Shanghai listing, and up to 779.1m shares to its controlling shareholder, Dalian Port Group.
Hopes are to raise up to Yuan6bn ($902m), which Dalian will use to fund 16 expansion projects at a cost of Yuan366m ($55m).
What’s intriguing about this listing is the timing. Global markets are still not ‘safe’ and it will be interesting to see how the market responds to a port listing at this time.
Will it go the way of Ningbo’s planned initial public offering which was 20% reduced from its original proposal of 2.5bn shares in October? Slow interest was demonstrated by the fact that the institutional slice of the shares was only covered 2.41 times - much weaker that other Shanghai IPOs. And Ningbo had already postponed its IPO on the back of the weaker global markets.
Or will it follow in the footsteps of Pipavav’s keen offering in August? Gujarat Pipavav Port raised Rs5.08bn ($111m) from its floatation, Rs1 per share over that agreed by anchor investors. Here, the 11.6% portion set aside for non-institutional investors was covered more than 85 times, a sharp contrast to Ningbo’s cover.
Dalian is no doubt acutely aware of the risks, and has already lowered its issue since it was first mooted, perhaps as an act of risk management. The port had originally planned to issue 2.4bn shares with half of the new shares issued to its controlling shareholder Dalian Port Corp.
And a Shanghai listing has been on the table since 2008; no doubt the unstable market conditions have played a part in the length of time it has taken to commit.
At the time of writing, Dalian had kicked off its pre-marketing for its reduced Shanghai listing in earnest. But by the time this issue of Port Strategy hits your desk, the final pricing will have been set and plans for the actual listing will have been announced. Then it’s a waiting game to see if the investors come in their droves or are noticeable by their absence.
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