A unit of Chinese contract drugmaker Wuxi Biologics has experienced overwhelming demand for its initial public offering (IPO) in Hong Kong, closing its order book early and potentially pricing the deal at the top of its marketed range, according to sources familiar with the matter. This is a remarkable occurrence in a year that has seen a turbulent market for listings in Hong Kong.
If Wuxi XDC Cayman prices its IPO at the high end of its marketed price range, at 20.60 Hong Kong dollars (US$2.64) per share, it is set to raise approximately US$470 million. The company, headquartered in Wuxi, China, specializes in research, development, and manufacturing of antibody-drug conjugates, a type of medicine used in cancer treatment.
The IPO was launched on Tuesday and was scheduled to close on Friday. However, due to high demand from both long-term investors and other sources, the decision was made to stop taking orders on Thursday afternoon.
Wuxi XDC Cayman plans to sell a total of 178.4 million shares in the IPO and aims to list its shares on the following Friday.
According to Wuxi XDC’s listing document, the IPO has received commitments from several global investors, including Invesco, Qatar’s sovereign-wealth fund, and HongShan (formerly known as Sequoia Capital China). These cornerstone investors have agreed to purchase nearly 58% of the deal at the top end of the price range, and they are required to hold the shares for a minimum of six months.
Wuxi XDC Plans Expansion and IPO Boosts Investment-Banking Fees
Wuxi XDC, a company based in China, has announced its intention to use a portion of its IPO proceeds for the construction of facilities in Singapore. Additionally, the company aims to expand its capacity in China, a strategic move aimed at bolstering its market presence. When approached for comment, Wuxi XDC did not respond.
Amidst an uncertain stock market environment in Hong Kong, numerous companies planning to launch share sales have opted to hold back, patiently awaiting improvements. This hesitation is largely due to the 11% decline experienced this year by the Hang Seng Index, a result of China’s weakening economic recovery and escalating tensions with the United States. Consequently, foreign investors have significantly reduced their exposure to Chinese stocks.
However, Wuxi XDC’s IPO serves as a positive development for investment-banking fees, particularly for the predominantly U.S.-based banks responsible for managing the offering. Given the prevailing slump in deals involving Chinese companies on a global scale, investment banks stand to face their lowest fee earnings in the past decade. Under the terms of the Wuxi XDC deal, banks involved will receive a commission of 2.7% of the total deal size, amounting to approximately $12.7 million at the upper end of the range.
Leading the offering are prominent financial institutions including Morgan Stanley, Goldman Sachs, and JPMorgan Chase. Citigroup is also involved as a bookrunner, alongside Chinese firms China International Capital and Huatai Securities.