China's Best Inc raises $450 mln in US IPO

World
Europe

Chinese logistics firm Best Inc priced its US initial public offering at the bottom of expectations, raising 450 million US dollars after it revised terms of the deal to cope with tepid investor demand.

Up to 932 million US dollars had originally been expected for the listing, underscoring how some fast-growing companies may have to temper their expected valuations to lure investors burned by recent underperforming IPOs.

The offering was the biggest by a Chinese firm in the United States since rival express delivery firm ZTO Express Inc raised 1.4 billion US dollars in October. ZTO’s stock has traded below its IPO price since debuting and is down 22 percent from the listing price.

A man rides an electric scooter past a distribution hub of the Chinese logistics company Best Inc in Beijing, China June 27, 2017. /Reuters Photo

Best, which is backed by Alibaba Group, priced 45 million American depository shares (ADS) at 10 US dollars each, the bottom of a 10 to 11 US dollars indicative range, Thomson Reuters publication IFR said on Wednesday, citing people familiar with the deal.

Best declined to comment on the IPO pricing when contacted by Reuters.

The company had initially expected a price range of 13 to 15 US dollars per ADS and an IPO consisting of 53.56 million new shares and 8.54 million existing shares.

The revised IPO one day before its market debut suggested weak investor enthusiasm for the original terms. The slump in ZTO’s share price also prompted some investors to balk at Best’s initial pricing, a person close to the deal told Reuters.

Best, founded by former Google executive Johnny Chou, faces stiff competition from Chinese logistics firms such as S.F. Holding, YTO Express and STO Express, all of which recently went public in China, the world’s biggest logistics market.

Best was banking on China’s booming logistics market to justify its valuation, but concerns over competition, along with rising fuel and labor costs prompted some investors to balk at Best’s initial pricing.

Best reported a net loss of 623.8 million yuan (94.9 million US dollars) for the six months ended June 30. Total revenue rose 133.5 percent to 8.10 billion yuan (1.23 billion US dollars), driven by its freight and express delivery business.

Chinese e-commerce company Alibaba, led by Jack Ma, holds a 23.4-percent stake in Best.

Source(s): Reuters