Yum China Holdings Inc (百勝中國) recorded the worst stock debut in more than a year among billion-dollar listings in Hong Kong.
The operator of KFC, Pizza Hut and Taco Bell restaurants in China yesterday closed 5.3 percent lower following its US$2.2 billion secondary offering.
No company selling at least US$1 billion of stock ahead of listing in the territory had fallen since Shenwan Hongyuan Group Co (申萬宏源) dropped 12 percent in April last year, Bloomberg data showed.
Photo: Bloomberg
Yum China is the first US-listed firm to slip on the first day since Alibaba Group Holding Ltd (阿里巴巴) started the current run in November last year of having shares also trade in Hong Kong.
US market volatility and the outlook for US brands amid escalating tensions with China have cast a cloud over Yum China’s offering. Its US shares have retreated 7.8 percent this month to their lowest since early last month.
The tensions are not a big concern for Yum China, chief executive officer Joey Wat (屈翠容) told Bloomberg TV yesterday morning.
The losing commencement by Yum China contrasts with what has been a hot market for initial public offerings (IPOs) in Hong Kong.
IPOs this year raised a combined HK$147.7 billion (US$18.97 billion) through last month, 74 percent above year-earlier levels, Hong Kong Exchanges & Clearing Ltd data showed.
The pipeline remains strong for the remainder of the year, highlighted by Ant Group Co’s (螞蟻集團) plan to go public next month in Hong Kong and Shanghai.
Yum China’s new shares were 52 times subscribed by retail investors, a ratio that beat nearly two-thirds of this year’ s new offerings in the territory, Bloomberg data showed.
The company’s fundraising schedule clashed with an IPO by Nongfu Spring Co (農夫山泉), whose retail oversubscription rate topped 1,100.
This year’s offerings have been particularly popular with Hong Kong retail investors, as ample liquidity encouraged banks to lend and more technology firms list in the territory, spurred by restrictions imposed on some in the US.
Seven of the 10 best IPO debuts in Hong Kong over the past decade took place this year, based on deals that raised more than US$100 million, while one-third of Hong Kong’s 36 IPOs since June 1 saw first-day price declines, Bloomberg data showed.
“We feel this year is the right time to do it because the Hong Kong IPO market is doing incredibly well,” Wat said in an interview with Bloomberg. “Hong Kong investors know the business in China a lot better than investors in other places.”
Yum China continues to target opening 800 to 850 new stores this year, despite the effects of COVID-19, Wat said, adding that the company has been able to get better locations, especially in top-tier cities, as smaller peers have needed to leave the market.
The firm’s overall store count hit 10,000 in July.
“The outlook for China’s fast food sector is promising, as demand is strong and new players are still attracted to enter the market,” Wat said, adding that it might not be a bad thing for Yum China that consumer spending slows in the country as people with tighter budgets might opt to go to the likes of KFC.
China’s retail sales at restaurants and catering businesses in July fell 11 percent from a year earlier, lagging other consumer segments.
In reporting second-quarter results, Yum China reported a sputtering recovery from the pandemic, with sales improving in April and May, but weakening again in June.
Sales this quarter are expected to remain under pressure.
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