Fourth time to be the charm for Richard Li’s IPO

Pccw

01/06/2022 03:17

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are her own.)
    By Jennifer Hughes
    HONG KONG, June 1 (Reuters Breakingviews) - Insurer FWD is
far from the only company to delay going public in the current
market volatility. Yet tycoon Richard Li’s Asia-focused outfit
is altering its plans  urn:newsml:reuters.com:*:nL1N2XN03O for a third time following a
costly Hong Kong to New York round-trip. Still, the pause gives
him time to improve the company’s profit record and to spice up
its pitch for the next attempt. 
    FWD headed to New York in June seeking up to $2 billion at a
valuation of as much as $15 billion after Hong Kong regulators
denied Li dual class stock, which the Asian hub reserves for
firms deemed "innovative". It returned home  urn:newsml:reuters.com:*:nL1N2T0038 in
February after tough demands from China-sceptic U.S. officials
and waning enthusiasm for Asian companies sapped deal momentum.
In between, FWD raised $1.6 billion in private deals, valuing it
at $9 billion while its Hong Kong float had sought to bump that
to $10 billion. 
    It sets up Li for another round with investors in Hong Kong
where his household family name  urn:newsml:reuters.com:*:nL3N2O008Q only gets him so
far. Several failed efforts, the last in 2008, to privatise his
telecoms-to-property group PCCW  0008.HK  are the stuff of stock
market legend involving variously regulators, court action and
his father Li Ka-shing, Hong Kong’s richest man. A near 200%
total return for its shareholders in the 10 years should have
improved the mood, however. 
    The post-New York fundraising provides some financial
breathing space, although long-time backers like Swiss Re
 SRENH.S  are likely to want an exit sooner than later. Some
humility could go a long way whenever FWD tries again. Its
now-shelved deal was poised to value it at between 1.5 and 1.7
times embedded value, according to UBS analysts. With
established giants AIA  1299.HK  and Prudential  PRU.L  trading
on multiples of 1.5 and 0.7 respectively, that always looked
punchy for a nine-year-old firm which only last year swung to
net profit. 
    Perhaps Li’s biggest hurdle for a fourth attempt may turn
out to be the stigma attached in Chinese to the number four,
with its connotations of death. Companies eyeing IPOs in Hong
Kong, where stock codes are numeric, often pay up to avoid it.
Unlucky as that may be, Swiss Re and FWD’s more recent investors
such as Apollo  APO.N  will be hoping it doesn’t take many more
attempts to get this deal done. 
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Twitter
    
    CONTEXT NEWS
Asian insurer FWD Group has delayed its Hong Kong initial public
offering because of volatile markets, Reuters reported on May
31, citing sources with knowledge of the situation. 
    The deal, expected to raise about $1 billion, was the
group’s third effort to float. In June it filed for a New York
listing after Hong Kong regulators refused to allow it to go
public with dual-class shares that would give outsized voting
power to founder Richard Li. 
    In February however, FWD filed a prospectus in Hong Kong,
without supervoting stock, following a sharp drop in enthusiasm
for Chinese and Asian stocks in the U.S. on the part of
regulators and investors. Hong Kong only allows dual-class
shares for so-called “innovative” companies. 
    FWD reported a net profit of $249 million in 2021 following
losses totalling $546 million in the preceding two years. 

 (Editing by Una Galani and Thomas Shum)
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