Western Banks Offering Zero or Unusually Low Fees for Some Work on Hong Kong IPO -Sources
June 15 2017 - 1:38PM
Dow Jones News
By Julie Steinberg
A spate of bids by Morgan Stanley and other Western banks
offering to charge zero or unusually low fees for some of their
work on a Hong Kong initial public offering is raising questions
about the increasing competitiveness of the city's IPO market.
Bankers this week pitched for telecom-infrastructure
joint-venture China Tower Corp.'s IPO, which is expected later this
year and could raise as much as $10 billion. According to people
familiar with the matter, Morgan Stanley said it wouldn't charge
anything to work as a sponsor on the deal, a role that includes
conducting due diligence and shepherding the company through the
listing process. The bank can still later collect lucrative
underwriting fees, however, which are separate.
Goldman Sachs Group Inc., Bank of America Merrill Lynch and UBS
Group AG were among the banks that bid on the lower end to be a
sponsor, people familiar with the matter said. Two offers came in
at 100,000 yuan and 360,000 yuan, respectively, far below a typical
sponsor fee.
Banks are being forced to compete aggressively because companies
looking to list in Hong Kong consider proposed fees when awarding
sponsor roles. Sponsor fees tend to be minimal in general, but
banks have a better chance at scoring underwriting roles if they
become sponsors on the deal first.
Some industry participants, surprised at Morgan Stanley's bid,
said offering to work for free runs counter to guidance from the
city's securities regulator. Some lawyers said the rules don't
expressly prohibit such offers, and that sponsor fees often get
rebated anyway when underwriting commissions are paid.
Write to Julie Steinberg at julie.steinberg@wsj.com
(END) Dow Jones Newswires
June 15, 2017 13:23 ET (17:23 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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