Jiangsu Slender West Lake Postpones Hong Kong IPO Amid Weak Market, Regulatory Checks

Hong Kong sees last-minute IPO cancellations amid increased regulatory checks, weak market

Jiangsu Slender West Lake Culture and Tourism postponed its HK$227 million (US$28.93 million) Hong Kong listing just hours after closing its order books, citing “several factors, including the prevailing market conditions”.

The state-owned aquatic tourism service provider became the latest company to delay a listing after launching its share sale.

Small-cap issuers face a difficult market

At least three companies have now shelved their listings in the city after launching share sales since the start of July.

The cancellations come as tougher regulatory oversight and weak investor demand create difficulties for many mainland China issuers, according to industry players.

The pressure has been particularly significant for small-cap non-technology firms, many of which have been forced to delay their fundraising plans or cancel them at the last minute.

SWL Tour’s decision shows how market conditions can affect an offering even after the order-book process has ended.

The company attributed its postponement to several factors, including the prevailing market conditions, according to a statement cited in the source.

Institutional investors become more selective

“Institutional investors are now more cautious about small-cap stocks with limited fundamentals and growth prospects,” said Roy Lo Wa-kei, managing partner at the accounting and consulting firm SW Hong Kong.

The SWL Tour deal did not bring in any cornerstone investor, according to its prospectus.

The absence of a cornerstone investor left the offering more reliant on institutional demand during a period when such investors were showing greater caution toward small-cap stocks.

The company had opted for Hong Kong’s so-called Mechanism B, which caps the public tranche at just 10 per cent.

That structure left allocation and pricing power more dependent on institutional buyers, according to the source.

The combination of limited institutional interest, increased checks and weak market conditions has made fundraising more uncertain for smaller mainland China companies seeking a Hong Kong listing.

Source: South China Morning Post