New York-listed Vipshop launches $150 million ADS sale

In the first offering since its IPO in March last year, the Chinese online discount retailer plans to use the proceeds for capital expenditure.
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Vipshop: An online bargain basement
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<div style="text-align: left;"> Vipshop: An online bargain basement </div>

Vipshop Holdings, a Chinese online discount retailer listed on the New York Stock Exchange, has started the roadshow for an offering of American depository shares (ADSs), which is expected to raise about $150 million, a source said yesterday.

Some 66.7% of the deal is offered by the company and the remaining 33.3% is offered by selling shareholders. The company said it will not receive any proceeds from the ADSs sold by the selling shareholders.

The deal was launched early yesterday morning Hong Kong time, and it is expected to price in the middle of next week. The roadshow will take place in Asia and the US.

It is the company’s first offering since it went public in the US last March, after raising about $73 million through its IPO. Before Vipshop filed the preliminary prospectus for the ADS offering to the SEC in the US, the stock ended its New York trading down 0.6% on Tuesday. However, at $25.24 it is still more than 288% up from the offering price of $6.50. The S&P 500 Index has risen about 10% during the same period.

The IPO was arranged by Deutsche Bank and Goldman Sachs.

The latest offering comprises six million ADSs, two million of which are secondary shares offered by the various selling shareholders. The other four million new shares account for about 7% of the company, the source said. The 15% greenshoe option will be secondary shares. Each ADS represents two ordinary shares.

There is no indicative price guidance as the transaction is carried out against a live market. But based on Tuesday’s closing price of $25.24, the overall deal size works out at about $151.4 million.

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 filing. 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.

Deutsche Bank, Goldman Sachs and J.P. Morgan are joint bookrunners for the deal, according to the filing.

Vipshop is China’s leading online discount retailer for brands, offering high-quality branded products to consumers in China through flash sales on its website, according to the filing.

Flash sales are a new online retail format combining the advantages of e-commerce and discount sales through selling a finite quantity of discounted products or services online for a limited period of time, it says. As of the end of 2012, it 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 net profit of $6.3 million in the fourth quarter of 2012, the first time it achieved profitability after tax.

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