The Chinese owner of the Ironman brand of triathlons has drawn a tepid response from investors with its initial public offering, a clear indication that enthusiasm for Chinese listings is waning.
Wanda Sports Group (WSG) listed its American Depositary Shares on Nasdaq on Friday. Its scaled-down offering priced below its indicative range, which had already been revised lower, then traded south and closed down 35.5%.
The company is still worth a cool US$727 million at the closing price of US$5.16 per share, down from listing at US$8 a pop and an opening price of US$6.
Still, the cool response mimics that shown to the video-game streaming service DouYu International Holdings (DOYU) . DouYu priced its US$775 million offering at the bottom of its price range on July 16, although it is still the largest IPO from a Chinese company in the United States this year.
Wanda Sports will pocket US$219 million from the offering, if the underwriters exercise their overallotment in full. Should they not do so, given the decline in the shares, the tally would be reduced by US$28.6 million.
Wanda Sports Group had been initially expected to price its shares between US$12 and US$15. It was originally looking to sell 33.3 million shares. But it trimmed the number of shares on offer as well as the price.
The company revised the shares on offer to 23.8 million, and reset its target to between US$9 and US$11. At its largest and highest price, the company was looking to raise US$500 million, more than double the tally it finally achieved.
The Beijing-based company is an affiliate of the Dalian Wanda Group, one of China's largest conglomerates. The sports subsidiary owns World Triathlon, which owns and runs the Ironman races, and Infront Sports & Media, a Swiss sports-marketing company.
Dalian Wanda's founder, Wang Jianlin, is China's fifth-richest man, according to the Hurun China Rich List, with a fortune of US$20 billion. That total fell 10% in the last year.
Dalian Wanda was one of the most-aggressive international acquirers of companies during the middle part of this decade. But after Chinese regulators started questioning the wisdom of non-core purchases, and the source of the assets backing many deals, the high-profile tycoons began scaling down their profiles. Beijing also cut down the availability of credit, and those aggressive corporate entities rapidly started selling off assets.
In 2015, Dalian Wanda bought Infront Sports & Media for US$1.2 billion and World Triathlon for US$650 million.
Wanda Sports has given an extremely generic description of what it's going to do with the money it has just raised: repay debt, fund "strategic investments" (are there other kinds?), and for "general corporate purposes" (again, hard to imagine a corporation using the funds for non-corporate purposes).
Wanda Sports gets a large share of its revenues from international operations. But that does not appear to matter to investors. It is being tarred with the same brush as other Chinese companies.
Hong Kong listings and U.S. IPOs of Chinese companies have averaged a gain of just 7% for those that have gone public in 2019, according to Dealogic. The listings from 2018 are showing an average decline of 11.5%.
That's at odds with the red-hot gains of 56% that global IPOs have posted in 2019. In response, 28 Chinese companies have put off plans for public offerings this year. The largest example came mid-month, when Budweiser parent AB InBev (BUD) pulled its US$9.8 billion listing in Hong Kong of its Asia operations.
It is also at odds with the performance of Chinese companies on the mainland Chinese stock markets. The CSI 300 index of the largest companies listed in Shanghai and Shenzhen has advanced 28.0% so far in 2019, one of the best performances worldwide.
Fears over the trade conflict between China and the United States are coloring the opinions of investors. There is also open hostility toward Chinese companies among U.S. legislators, some of whom have introduced a bill that would threaten to delist Chinese companies if they do not allow U.S. regulators to go over their audits.
Citigroup Global Markets (C) , Deutsche Bank Securities (DB) , Morgan Stanley (MS) and the SG Americas Securities unit of Société Générale (SCGLY) were the joint bookrunners together with the Chinese investment banks China International Capital Corp. HK:3908, CLSA and Haitong International Securities HK:0665.