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The $1bn initial public offering from a Chinese start-up that was set to be Hong Kong’s biggest listing this year has been halved, reflecting investors’ aversion to share offers in China after years of underperformance.
J&T Express, a delivery company with operations in south-east Asia and China, was forced to lower the fundraising target due to lacklustre investor response, according to three people familiar with the matter.
The downsized listing of the group, which counts Chinese ecommerce giants Pinduoduo and ByteDance’s TikTok as its clients, comes as global investors are increasingly pessimistic over China’s growth outlook and frayed relations with the US.
“Right now with China [IPOs] you need to take a 20 to 30 per cent discount just for deals to get done,” said one banker, adding that J&T had “decided to keep the valuation the same but just sell a smaller stake”, as poor market conditions in Hong Kong sapped investor appetite.
J&T, which cut its valuation from $20bn to $13bn in May, expects to maintain that level when it lists, according to people familiar with the matter. Bank of America, Morgan Stanley and CICC are joint sponsors of the deal. J&T declined to comment.
At $1bn, J&T’s IPO would have been the largest in Hong Kong since the $1.3bn listing of China Aviation Lithium Battery in October 2022, according to Dealogic data. At $500mn, it would mark the largest since the listing of liquor group ZJLD in April.
Companies have raised just $3.5bn from Hong Kong listings this year, down almost 70 per cent from a year ago and on track for the lowest annual total in two decades, as hopes for a steady stream of IPOs from China have been dashed by the country’s sluggish economy and rising geopolitical risk.
The city’s benchmark Hang Seng index has fallen more than 8 per cent this year.
J&T is also facing questions from investors on the impact of new regulations in Indonesia that ban ecommerce transactions on social media platforms, which are some of its fastest growing clients.
The ban forced TikTok owner ByteDance to shut its Indonesian version of TikTok Shop, the in-app shopping platform, in October. Prospective IPO investors said J&T had pitched TikTok Shop as a key source of delivery demand.
TikTok’s operations in south-east Asia — J&T’s only profitable market — are coming under increasing scrutiny in other countries, including Vietnam and Malaysia. People familiar with the company said Indonesia accounted for roughly half of the $330mn in adjusted earnings from the region last year. By comparison, the company’s China operations reported a $722mn loss for the period despite reporting more revenues.
One prospective IPO investor said that while J&T’s business from TikTok Shop had been low margin, “it allowed them to build a story around the IPO about its dominance in the region — especially in Indonesia — to investors”.
“We have asked questions about what their plan is and to what extent the ban might hit their outlook, especially if other countries such as Vietnam do something similar,” the investor added.
Analysis of J&T’s prospectus by Singapore-based research group Momentum Works showed that TikTok Shop had quickly become a top customer the company, accounting for 7 per cent of overall revenue after only 18 months.
“There might be investors who want to get a bargain on the IPO based on [the ban], but internally we’re not too worried about the overall business growth in south-east Asia,” said a person familiar with J&T’s operations in the region.
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