Meituan Dianping feeds into Chinese tech fears

China Literature

13/09/2018 04:08

(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own.)
    By Alec Macfarlane
    HONG KONG, Sept 13 (Reuters Breakingviews) - China’s food
delivery goliath encountered some weak appetites in Hong Kong.
Meituan Dianping  3690.HK , the one-stop super-app operator,
raised $4.2 billion in its closely watched initial public
offering. Big fund managers could scarcely afford not to buy
into the share sale, but mom and pop investors were noticeably
less enthusiastic than they have been for other recent
technology-stock debuts.
    Fast-growing Meituan, with its 310 million users and 4.4
million merchants, will command about a $55 billion valuation,
based on the figures reported on Thursday by Thomson Reuters
publication IFR. So-called institutional investors, such as
pension funds, devoured the portion of the IPO allotted them. It
would be hard for any serious portfolio to sidestep the stock
given its heft and exposure to Chinese consumers. Rival Alibaba
 BABA.N  recently described the on-demand delivery market as a
$1 trillion opportunity. 
    At the same time, Tencent-backed  0700.HK  Meituan picked a
tough time to start pitching its stock. Escalating trade
tensions sparked concerns about Chinese disposable incomes. Both
Hong Kong and mainland equities recently dipped into bear-market
territory. Likewise, the Kraneshares CSI China Internet ETF, a
basket of tech companies listed in New York and Hong Kong, also
is down 20 percent this year.
    These concerns were evident in the amount of Meituan shares
sought by retail investors, a staple of the Fragrant Harbour
market. There were enough orders to cover just 1.5 times that
tranche, according to IFR. By comparison, when Tencent spun off
online publishing startup China Literature  0772.HK  last
November, it was 625 times oversubscribed. In April, Ping An
Healthcare and Technology’s  1833.HK  multiple was 658 times.   
    These pools of demand are telling in Hong Kong; retail
accounted for nearly a quarter of trading in 2016, according to
the latest figures available from the local bourse. What’s more,
they can account for up to half an IPO if orders exceed 100
times the shares available to them. Despite being unprofitable,
Meituan is considered one of China’s stronger tech stories. If
individual investors aren’t craving these shares, weaker issuers
may go hungry. 
    On Twitter https://twitter.com/AlecMac11
    
    CONTEXT NEWS
    - Chinese online-services company Meituan Dianping raised
HK$33.1 billion ($4.2 billion) in its initial public offering in
Hong Kong, Thomson Reuters publication IFR reported on Sept. 13,
citing unnamed sources.  
    - Tencent-backed Meituan Dianping, whose app offers food
delivery, restaurant reviews and more, sold about 480 million
shares at HK$69 each, near the top end of a marketed range of
HK$60 to HK$72 per share. 
    - Bank of America Merrill Lynch, Goldman Sachs and Morgan
Stanley are serving as joint sponsors of the IPO while China
Renaissance is the company’s sole financial adviser on the
offering. 
    - For previous columns by the author, Reuters customers can
click on  MAC/ 
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    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Meituan Dianping raises HK$33.1bn from IPO – sources   
 urn:newsml:reuters.com:*:nL3N1VZ1MF
IPO prospectus     http://www.hkexnews.hk/listedco/listconews/sehk/2018/0907/LTN20180907011.pdf
BREAKINGVIEWS - Meituan Dianping IPO demands a nemesis discount 
   urn:newsml:reuters.com:*:nL3N1VM3Y5
BREAKINGVIEWS - Jack-of-all-apps Meituan masters few for IPO   
 urn:newsml:reuters.com:*:nL4N1TR18Z
BREAKINGVIEWS - Meituan steers onto collision course with
Alibaba     urn:newsml:reuters.com:*:nL3N1RO1OD
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Editing by Jeffrey Goldfarb and Katrina Hamlin)
 ((alec.macfarlane@thomsonreuters.com; Reuters Messaging:
alec.macfarlane.thomsonreuters.com@reuters.net))