Pre-IPO investors launch GDR offering in Parade Technologies

Taiwan-listed Parade Technologies, a supplier of mixed-signal integrated circuits for computers, consumer electronics and display panels, yesterday launched a fully marketed sale of global depositary receipts (GDRs) that could raise about $123 million. The GDRs will be backed by secondary shares sold by a group of pre-IPO investors.

Having listed on Taiwan’s GreTai Securities Market as recently as September last year, this will be the first real chance for international investors to buy into the Silicon Valley-based company, which has seen its share price more than triple since the IPO. Hence the management is taking the opportunity to market Parade and its business to the wider investor community through a full roadshow that started in Taiwan yesterday and will go on to visit Asia, Europe and the US. The deal is expected to price on July 18, US time.

The pre-IPO investors, which weren’t identified, are selling up to 9 million shares in the form of GDRs, representing about 17% of the company, according to a source. Each GDR is equal to one common share. Goldman Sachs is the sole bookrunner.

Since the sale is being done against a live share price, there is no discount guidance yet.

After the launch of the deal, Parade’s share price fell 0.7% to a close of NT$408 yesterday, which was in line with the decline in the Taiwan GreTai Securities Market Index. Based on the current share price and the maximum number of shares to be sold — and assuming a slight discount — the deal size could be somewhere around $120 million.

The stock gained about 175% in the first three weeks after the September trading debut and reached a high of NT$475 in early March, before retreating slightly. It is currently down 14% from that high, which is in line with the 13% drop in the GreTai index in the same period — a period that has also seen global stock markets tumble due to the persistent worries about the debt crisis in Europe. Despite this sell-off, the GreTai index is still up 12% so far this year.

Parade raised about NT$1.15 billion ($40 million) from its IPO, which was led by Mega Securities and priced at NT$130 per share. At the time of the listing the company had a market cap of about $230 million. That has since increased to about $725 million.

The fabless semiconductor manufacturer was founded in 2005 and has received venture capital from several strategic investors, including Intel Capital, United Microelectronics Corp (UMC), Asia Vest Partners and Legend Capital, according to its website.

It has had an upbeat start this year in terms of earnings. In the first quarter its revenue jumped 141.4% from the same period a year earlier to NT$1.1 billion and net income climbed 221.9% to NT$266 million, the company said in its earnings statement in April.

The GDR sale was well flagged after the company said in late April that its board of directors had approved a plan to sponsor a possible offering of up to 11 million ordinary shares held by certain pre-IPO investors. It noted that the transaction would be in the form of GDRs and was expected to be completed this year, subject to regulatory approvals and market conditions.

A marketed follow-on offering like this is quite common in Taiwan, where buyers for IPOs tend to be dominated by domestic institutions. The offering is Parade’s chance to broaden its investor base, particularly outside of Taiwanese domestic institutions, the source noted.

The deal comes after a number of block trades in Taiwan-listed companies during recent weeks. Last week, private equity firm TPG sold its entire stake in Taiwanese lender Taishin Financial, raising $181.5 million. The company had one strong anchor investor that took up a good portion of the deal, according to a source. And a few days earlier, German plastics component maker Balda sold almost its entire remaining stake in TPK Holding through a club-type deal, raising a total of $194 million. The deal was launched and priced on a Saturday, Hong Kong time (June 30), allowing Balda to recognise the capital gain in the financial year that ended in June.