China Logistics Company ZTO Express Drops in Trading Debut
October 27 2016 - 11:20AM
Dow Jones News
Shares of ZTO Express Inc. slid in their market debut, a
disappointing turn after the Shanghai-based logistics company
raised $1.4 billion in the largest U.S. initial public offering
this year.
The stock opened at $18.40 and slid 9.2% to $17.70 in the first
few minutes of trading. ZTO's offering had priced at $19.50 a
share, ahead of its expected price range of $16.50 to $18.50. The
company, which delivers parcels for businesses including Chinese
e-commerce giants Alibaba Group Holding Ltd. and JD.com Inc.,
agreed to sell 72.1 million shares in the deal.
The offer, which could rise to $1.6 billion if an overallotment
option is fully exercised, is in excess of the $1.3 billion raised
by Japanese messaging-app operator Line Corp. in its New York and
Tokyo IPO in July.
ZTO's offering is also the biggest IPO of a Chinese company in
the U.S. since Alibaba raised $25 billion in New York in 2014. The
shares are listed on the New York Stock Exchange.
Founded in 2009 by a veteran of China's logistics industry, ZTO
operates a fleet of more than 3,300 trucks. Its main business is
delivering parcels for Alibaba, which accounted for 75% of its
business during the first half of this year. ZTO's backers include
Hillhouse Capital Group and Warburg Pincus LLC.
Bankers on ZTO's IPO advertised the company's offering as a way
for investors to cash in on China's burgeoning e-commerce industry.
ZTO plans to use most of the money from the IPO to purchase land,
build facilities and buy equipment to expand its sorting capacity.
It intends to use the rest of the proceeds to acquire more trucks,
invest in information technology and for potential strategic
transactions.
China had $609 billion of online retail sales last year, almost
double the $342 billion in the U.S., according to data from
iResearch Consulting Group cited in ZTO's offering prospectus. That
figure is expected to surge to $1.5 trillion by 2020, driven by
China's emerging middle class and growing internet and mobile use
among consumers, according to iResearch.
ZTO made an operating profit of 1.5 billion yuan ($223 million)
in 2015, a 150% increase from 2014. Its operating-profit margin in
2015 was 25.1%, up from 15.4%.
The company has a 14.3% share of China's express-delivery market
by parcel volume, compared with the 12.4%, 14.7% and 10.5% held by
rivals Shanghai STO Express Co., Shanghai YTO Express (Logistics)
Co. and Yunda Ltd., respectively, according to iResearch.
ZTO's decision to list in the U.S. is partly due to its
reluctance to join the queue of more than 800 companies waiting for
regulatory approval for IPOs in mainland China, according to a
person familiar with the matter.
Morgan Stanley and Goldman Sachs Group Inc. were lead managers
for the IPO. China Renaissance, Citigroup Inc., Credit Suisse Group
AG and J.P. Morgan Chase & Co. also worked on the offering.
Write to Alec Macfarlane at Alec.Macfarlane@wsj.com
(END) Dow Jones Newswires
October 27, 2016 11:05 ET (15:05 GMT)
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