Citigroup completed a top up placement for Tom.com yesterday (Thursday), raising total proceeds of $133 million after the deal was increased by nearly one third on the back of strong subscription. The placement comes on the heels of a strong share price rally, which has seen the stock climb 31.72% year-to-date and as such many are likely to view the deal as an opportunistic cash call.
However, while Tom.com has outperformed the Hong Kong indices, its performance pales against that of the US listed Chinese portals, which have risen spectacularly on the back of intense hedge fund activity. Both Sohu.com and Netease.com have returned roughly 2,400% over a 12-month basis, while Sina Corp, which launched an $80 million zero coupon convertible earlier this week, is up 1,235%.
The deal was launched at Hong Kong's open, with the lead manager marketing a 350 million share deal at an indicative price of HK$2.23 to HK$2.30, representing a 6% to 9% discount to the stock's HK$2.45 close on Wednesday. With books fully covered within 30 minutes, the discount was revised to 6% to 7% after which the book rose to two times oversubscription.
At this point, the lead approached the company with a view to increasing the issue size by a further 100 million shares. Books subsequently closed at 2pm, two-and-a-half times covered at the revised issue size and given the lack of price sensitivity, pricing came in at the tight end of the range.
About 60 institutional investors are said to have participated in the deal and while there were a large number hedge fund orders, the final allocation split saw 52% placed with institutions, 27% with hedge funds and 20% with retail. By geography, the deal saw 59% placed in Asia, 29% in Europe and 12% in the US.
The transaction represents a hefty 50 days trading volume, 13% of the outstanding share capital and about 50% of the freefloat. It will dilute existing investors by 88%.
Earlier this week, it announced its intention to purchase 64% of China Entertainment TV (CETV) from AEL for $6.8 million.
