The first straight equity deal of the year from Taiwan was priced last night (Tuesday) as Hannstar Display Corp raised $263.9 million from a GDR offering.
UBS led the 35 million unit deal, which equated to 700 million new shares. There is also a five million unit greenshoe. Having marketed the deal at a discount range of 0% to 8%, pricing came in a $7.54, representing a 5.9% discount to the stock's NT$13.50 spot close.
Year-to-date the stock is up 4% and has risen 0.5% since the lead opened the order book last Wednesday. On the day of pricing, however, it fell 1.1% and has underperformed the overall sector, which has risen about 5% over the past week or so.
The current deal marks Hannstar's second GDR and a change of strategy from 2003 when it came to the international capital markets three times via two convertibles and a debut GDR in July. This time round, it opted for a marketed rather than an accelerated offering. Observers say this factor was key to the tight discount since the company needed to show it has a viable business plan in order to shift the focus away from hedge funds.
The order book closed about 1.8 times covered at the final issue price with participation from 72 investors, of whom 42% came from Asia, 40% from Europe and 18% from the US. About 60% to 70% of investors were new to the stock, particularly from Europe.
The relatively low level of oversubscription reflects the tight discount and continuing investor wariness towards the flat panel sector, which was on a downward trend for most of the fourth quarter. To show investors that it will not be making multiple cash calls, Hannstar inserted a six-month lock up into the deal rather than the standard three-month period. It now says it is fully funded for 5G.
When it priced its debut GDR in July 2002, the $175 million deal needed a 20% discount to spot because investors were worried the cycle was outrunning itself. The deal was also the last to come to market before the regulator scrapped the three-month period before a debut GDR becomes fungible with the local stock.
At that point, Hannstar was trading at 1.3 times 2003 book. It is now trading at 1.1 times 2004 book.