China's ZTO Express falls in market debut

Thu Oct 27, 2016 5:16pm EDT
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By Lauren Hirsch and Sruthi Shankar

(Reuters) - Shares of Chinese package delivery company ZTO Express (ZTO.N: Quote) fell 15 percent from the company's IPO price in its U.S. market debut on Thursday, despite having raised more than expected at $1.4 billion the night before.

The stock performance showed that underwriters may have overestimated investors' enthusiasm for the largest IPO by a Chinese company since the $25 billion IPO of e-commerce giant Alibaba Group Holding Ltd (BABA.N: Quote) in 2014, sources said.

ZTO's IPO, which had been expected to raise $1.33 billion, raised $1.4 billion on Wednesday night, after underwriters priced the IPO at $19.50 a share, above its previously indicated range of $16.50 to $18.50 a share.

"The share placement was not in long-term hands, and selling begets selling once you break IPO price," said Kathleen Smith, principal at Renaissance Capital, which manages IPO-focused exchange traded funds.

The deal came to a volatile market, with a looming election and uncertainty around interest rates. Shares of recently hot IPOs such as Acacia Communications Inc (ACIA.O: Quote) Twilio Inc TWLO.N were down. Only seven IPOs out of 16 that priced in October were trading above their IPO price.

"The air is starting to come out of these highly valued technology companies" Smith said

ZTO's IPO comes after lull in U.S. IPOs from Chinese firms, which had plunged to just $309 million from five deals in 2015, after a record $29 billion in the previous year because of Alibaba's listing. Year to date, there have been six Chinese IPOS in the U.S., according to Thomson Reuters data.

Chinese companies, particularly not-yet-profitable technology firms, often prefer the U.S. market, looking to tap its large pool of fund managers more familiar with startup investing. A U.S. IPO can broaden the company's profile.   Continued...

A man unloads parcels from a vehicle of a ZTO Express delivery in Beijing, China, October 27, 2016. REUTERS/Thomas Peter