China Tourism Group Duty Free Corp is offering a bigger discount than usual to entice investors to buy shares in a new listing in Hong Kong that aims to raise up to $2.16 billion.
The offering, expected to launch on August 25, comes amid hard times in the tourism sector, which has been hammered by repeated lockdowns under China’s rigorous zero-Covid policy.
This will be the largest share sale in the city so far in 2022, which has been a disappointing year also for listings in Hong Kong – the slowest for new listings since 2009.
Shanghai-listed China Tourism is planning to sell 102.8 million shares priced between HK$143.50 and HK$165.50 ($18.30 and $21.10) each, according to its term sheet.
The offer has already been fully subscribed, according to two people with direct knowledge of the matter. The sources spoke on condition of anonymity because they were not authorised to discuss the matter with media.
China Tourism, which has built the largest duty-free retail network in China, did not respond to a request for comment on the deal’s launch or subscription rate.
The launch of the deal comes as Hainan island, in China’s south where China Tourism has several major shopping outlets, remains under tight restrictions due to a Covid outbreak.
The price range represents a 29% to 39% discount to the stock’s 201 yuan closing price on Thursday in Shanghai.
Hong Kong share sales of Chinese-listed companies are typically offered at a discount to entice investors to buy the stock but the flagged discount of China Tourism is higher than normal. The rate was chosen to help ensure the stock trades positively in the secondary market, one source said.
China Tourism’s Shanghai-listed shares have recovered most of their losses since lockdowns across Hainan began to be ordered last week. Its shares are down 8% year to date.
China Tourism plans to set the final price next Thursday, the term sheet said, and the Hong Kong stock will start trading on Thursday week (August 25).
Almost 40% of the stock on offer in the deal has been sold to cornerstone shareholders who will invest about $795 million, according to the term sheet.
Sanya, a holiday city on the southern end of Hainan island at the centre of the Covid outbreak, reported 1,690 symptomatic and 1,504 asymptomatic cases from August to 10.
The duty-free shop operator’s deal, if executed, would surpass Tianqi Lithium’s $1.7 billion listing in June to become the biggest share sale in Hong Kong in 2022.
There has been $4.9 billion worth of initial public offerings and secondary share sales in the city this year compared to $34.7 billion at the same time last year, according to Dealogic data.
- Reuters with additional editing by Jim Pollard