Vipshop Holdings, a Chinese online discount retailer listed on the New York Stock Exchange, and a number of its shareholders have raised a combined $172.8 million from a follow-on offering of American depository shares (ADSs), a source said yesterday. The final price represented a discount of 1.8% versus Wednesday’s closing price.
Due to strong demand, the size of the deal was increased to 7.2 million ADSs, from the initial 6 million, as the selling shareholders chose to dispose of more shares than planned. The number of new shares sold by the company remained the same.
Some 56% of the final deal size, or 4 million ADSs, were sold by the company, while the remaining 44%, or 3.2 million ADSs, came from the selling shareholders, the source said. The sellers included pre-IPO venture capital investors, some angel investors, as well as some of the senior management.
The 4 million new ADSs are equal to 7.9% of the company, according to Bloomberg data. Each ADS represents two ordinary shares.
The deal launched last week and priced after the New York market closed on Wednesday. The ADSs were sold at $24 each, which translated into a tight discount of 1.8% versus Wednesday’s close of $24.44.
However, the share price fell 3.2% during the bookbuilding, including a 5.5% drop on the final day. On the last trading day before the launch (March 5), the stock closed at $25.24
There was no indicative price guidance as the transaction was carried out against a live market.
The company raised $96.8 million of fresh capital from the offering, while the selling shareholders pocketed a combined $76 million before expenses. The 15% greenshoe option will be all secondary shares.
Vipshop plans to use about $70 million of the proceeds to expand its logistics network and fulfilment capabilities, and about $10 million to further enhance its IT systems and infrastructure, including mobile technologies, according to the company’s filing last week. It plans to use the remaining proceeds for general corporate purposes, including funding working capital and potential investments in complementary businesses, although the company said it is not currently negotiating any such investment or acquisition.
The deal was multiple-times covered with about one-third of the demand generated out of Asia. The rest came from the US, another source said. In all, about 80 investors participated in the transaction. Investors have wanted to have more liquidity in the stock and likely saw this as a good buying opportunity, the person noted.
This was Vipshop’s first follow-on since it went public in March last year, after raising about $73 million through its IPO. The issuer struggled to attract investors ahead of the listing amid a widespread scepticism towards Chinese companies, particularly unprofitable ones in the internet space, and the size and price of the IPO had to be significantly reduced to get the deal across the line.
However, the share price has gained nearly 280% from the IPO price of $6.50, compared with an 11% increase in the S&P 500 Index during the same period.
Deutsche Bank, Goldman Sachs and J.P. Morgan were joint bookrunners for the follow-on offering. Deutsche and Goldman also arranged the IPO.
Vipshop is China’s leading online discount retailer for brands. According to the filing, it offers high-quality branded products to consumers in China through flash sales on its website.
Flash sales are a new online retail format that combines the advantages of e-commerce and discount sales by selling a finite quantity of discounted products or services online for a limited period of time. As of the end of 2012, the company says it had 26.8 million registered members and more than 4.9 million cumulative customers, and promoted and sold products for more than 5,800 popular domestic and international brands.
The company recorded a net profit of $6.3 million in the fourth quarter of 2012, the first time it achieved profitability after tax.
