Pre-IPO investors raise $59 million from Parade Technologies GDR

Three pre-IPO investors yesterday raised NT$1.76 billion ($59 million) from a fully marketed sale of global depositary receipts (GDRs) in Taiwan-listed Parade Technologies. The sale was well below the $120 million talked about at the launch after the underlying share price fell during marketing and the sellers decided not to sell as many shares as initially planned.

The GDRs were all backed by secondary shares, but the deal was supported by the company. Parade, which is a Silicon Valley-based supplier of mixed-signal integrated circuits for computers, consumer electronics and display panels, listed on Taiwan’s GreTai Securities Market in September last year. This was its first chance to market itself to the wider international investor community, which is why the management took the opportunity to participate in the roadshow that launched on July 9 and visited Taiwan, Asia, Europe and the US.

Since the sale was done against a live share price, there was no discount guidance at launch, but the bookrunners set a price range after the close of Taiwan trading Wednesday. The deal was priced at the bottom of that range early yesterday morning.

The selling shareholders sold 5.25 million shares in the form of GDRs at a price of NT$335 per common share, versus a price range of NT$335 to NT$350, a source said yesterday. The price range translated into a discount between 5.3% and 9.3% to Wednesday’s close of NT$369.50.

Initially, the three investors were planning to sell up to 9 million shares, which could have raised about $100 million based on the final price. Each GDR is equal to one common share.

After the pricing, Parade’s share price fell 3% to a close of NT$358.50 yesterday, holding above the final price. The Taiwan GreTai Securities Market Index gained 1%. The share price dropped 10% during the roadshow, compared to about a 5% fall in the index. Even with the recent declines, the stock is still up 175% since the IPO.

However, when the price range was revealed on Wednesday, investors were told that the selling shareholders were somewhat reluctant to sell at the lower part of the range and were still discussing the deal size, the source said. When the price was fixed right at the bottom, they chose to sell only about 58% of what they had initially planned. The final deal size represents about 10% of the company, according to Bloomberg data.

About 30 accounts participated in the transaction, and they were largely Asia-based investors and some global funds, the source said. The allocation was similar to the demand and skewed towards Asia-based investors.

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.

Parade raised about NT$1.15 billion ($40 million) from its IPO, which priced at NT$130 per share. The stock got off to a strong start after the September trading debut and reached a high of NT$475 in early March, before retreating slightly. It is currently down about 25% from that high, compared to a 16% drop in the GreTai index during the same period — a period that has also seen global stock markets tumble due to the persistent worries about the debt crisis in Europe. So far this year, Parade is down 8.3%, while the GreTai index is up 8%.

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. In the first quarter of this year, 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.

Goldman Sachs was the sole bookrunner.