Chinese Search Giant Baidu Taps Hong Kong Market for Funds -- Update
March 11 2021 - 11:51AM
Dow Jones News
By Joanne Chiu
Baidu Inc., the operator of China's largest search engine, aims
to raise about $3.03 billion from a Hong Kong share sale, joining a
string of U.S.-traded peers in securing a secondary listing closer
to home.
Chinese companies whose stock already trades in the U.S. have
rushed to obtain listings in Hong Kong, both as a way to tap
investors who are more familiar with businesses from China, and as
an insurance policy against potentially being kicked off U.S.
markets.
Since Hong Kong's stock exchange relaxed its rules in 2018 to
allow such secondary listings, 10 companies, including JD.com Inc.,
NetEase Inc. and Yum China Holdings Inc., have issued stock in Hong
Kong, raising a combined $29.9 billion, Dealogic data shows. The
biggest deal was by e-commerce giant Alibaba Group Holding Ltd.,
which raised $12.9 billion.
Baidu began taking orders from institutional investors Thursday,
according to a U.S. filing and a term sheet seen by The Wall Street
Journal. It intends to sell 95 million new shares, equivalent to
3.4% of its enlarged share capital, and plans to list on the Hong
Kong stock exchange March 23, the term sheet said. The tentative
deal value is based on the last closing price of the company's
Nasdaq-listed American depositary receipts.
Although Baidu was once seen as the Google of China, its profits
and market value haven't grown as quickly as those of China's two
biggest technology companies, Alibaba and Tencent Holdings Ltd. It
also faces competition for advertising dollars from newer players
such as short-video app companies ByteDance Ltd. and Kuaishou
Technology.
Still, the company has expanded into areas like driverless cars,
artificial intelligence and cloud computing. Its ADRs have more
than doubled in the past 12 months, giving it a market
capitalization of nearly $86 billion as of Wednesday, according to
FactSet. For 2020, Baidu earned $3.4 billion of net income on
revenue of $16.4 billion.
As is customary for Hong Kong share sales, the deal is split
into two parts. Most of the shares will be sold to international
institutional investors, while a small portion will be reserved for
individual investors in the city.
It set the maximum offer price for individual investors at 295
Hong Kong dollars per ordinary share, or the equivalent of $38.03
each. The offer price for the portion reserved for institutional
investors could be higher, the term sheet said. One ADR represents
eight ordinary shares.
The deal is being led by units of Bank of America Corp., Citic
Securities Co. and Goldman Sachs Group Inc. The final deal size
could increase by 15% to around $3.5 billion under a so-called
green-shoe option. Baidu will fix the final offer price March
17.
Longstanding accounting concerns could lead to Chinese companies
being delisted from the U.S. in coming years, under a law signed by
President Trump in December, if U.S. regulators aren't able to
inspect their audit papers.
Write to Joanne Chiu at joanne.chiu@wsj.com
(END) Dow Jones Newswires
March 11, 2021 11:36 ET (16:36 GMT)
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