Is your company large enough to IPO in the United States (U.S.)?
You know that when choosing a listing location three things should be considered
(1) the actual out-of-pocket costs for establishing and maintaining the listing;
(2) the effects of a listing location on your company’s valuation and liquidity; and
(3) the non-financial costs and benefits that are available in a particular listing location.
Given that an IPO will often be the most important capital markets and wealth creation event in your corporate life-cycle these considerations should be evaluated very carefully. Unmatched access to capital at a lower cost is a clear benefit of an IPO, along with corporate branding opportunities and a host of other benefits. However, these benefits become insignificant when the analysis that underpins your choice of listing jurisdiction is flawed.
IPOs in the U.S. typically cost significantly more than in other jurisdictions. Legal and accounting fees, printing, brokerage charges to raise the capital, insurances, director fees and other related expenses will be substantially higher in the U.S. than in many other countries. Therefore, it is highly advisable to ensure that a full cost analysis of an IPO listing, in a particular jurisdiction, is completed and then compared with other locations. Our analysis would suggest that the costs and burdens of a U.S. IPO substantially exceed those of other countries.
Have you appreciated the full costs and benefits, including the intangibles, of a U.S. IPO listing as compared with other listing jurisdictions?
The New York Stock Exchange (NYSE) and NASDAQ are the most prestigious stock markets in the world and therefore represent obvious listing targets. However, the competitiveness of the U.S. public markets has been seriously challenged in recent years * in particular:
- the valuation of U.S. IPOs has increased by more than six times – this significantly increases the valuation threshold you need to reach for the U.S. to be an IPO capital raising option;
- the age of companies at the time of a U.S. IPO has increased from approximately six-point-five to ten-point-five years – this reflects the length of time companies require to reach an increasingly higher IPO valuation threshold; and
- the annual number of U.S. IPOs has decreased from approximately 400 to 100 – this is a good indicator of the impact of the rising valuation threshold.
*Source: Dealogic Capital Markets/Capmktsreg.org
So, the U.S. market represents an increasingly shrinking opportunity for the smaller company seeking to IPO. Do you have a valuation greater than U.S one billion dollars? You don’t, then what are your alternatives?
Private equity is the next obvious choice however this is not necessarily the best alternative by which to grow a private company. Private equity funds tend to place lower valuations on their investee companies than the IPO marketplace. They also often impose shorter exit horizons. Moreover, because private equity investors can have different objectives from the founders of investee companies, there is a real possibility of founders losing control of their company. Were you aware that raising capital from the private equity market comes with some significant downside consequences?
Is raising capital from private equity markets really an attractive option for your company?
Because the presence of a strong IPO market permits founders and other entrepreneurs to retain control of a public company post an IPO, and to grow the company with less dilutive public equity, an IPO is still your most attractive route to investment capital. Unfortunately, this choice is increasingly unavailable to smaller companies.
Why is this the case? Underwriters are increasingly uninterested in comparatively smaller capital raises because:
- many large institutional investors will not consider investments in companies having small post-IPO market valuations;
- it becomes much more difficult to obtain coverage of the stock by securities analysts when post-IPO market valuations are projected to be low. As a result, there is a very real risk that these stocks will be deemed so-called orphan stocks (i.e. not followed by any securities analysts); and
- smaller private companies planning an IPO typically have a higher risk threshold than larger companies in a similar position. Accordingly, smaller private companies are more frequently rejected by the largest most prestigious accounting firms for U.S. IPOs.
Therefore, if you are a U.S. private company considering an IPO, with a value of less than US$1 billion you are very likely to be considered to be too small to list successfully in the USA these days. Furthermore, the costs of funding such an IPO listing are simply uneconomic in the USA.
What are your alternatives?
With no easily accessible IPO market in the United States for smaller companies those U.S. private companies wishing to obtain growth capital are forced to seek private equity financing with all of its associated potential pitfalls.
There are however alternatives for US companies, who have a valuation of less than U.S. one billion dollars, wishing to go public, and are prepared to consider jurisdictions outside of the USA. These locations secure the benefits of an IPO capital raising strategy, importantly, with significantly lower costs. The two most promising jurisdictions are the self-contained regions of Europe and Asia-Pacific. In particular, within the high growth Asia-Pacific region, Australia represents an extremely popular choice.
Have you considered these alternative listing jurisdictions? What does your listing cost analysis of alternative listing jurisdictions tell you? Have you discussed your listing options with expert sources who can provide you with a balanced picture of the alternatives available to you? A well-developed business case building exercise should quickly identify that your company size does matter. Moreover, it matters more in some regions of the capital raising world than in others. Your size therefore will be a major influence in determining your IPO strategy including listing location.
About BlueMount Capital
BlueMount Capital specialises in bringing US companies to the ASX, and has an office in Los Angeles to service its American clients
For further information please contact;
Level 32 200 George St
Sydney 2000 Australia
Telephone +61 2 8277 4112
Director and USA representative
1055 W 7th, 33rd Floor, Penthouse
Los Angeles CA 90017 USA
Telephone +1 212 470 6997
Boyuan Holdings Limited (“the Company”), today announced that it has lodged its prospectus with ASIC for an initial public offer of shares in the Company at 20 cents per share to raise a minimum of $15 million and a maximum of $20 million. The Company has also submitted an application to the ASX for admission to the securities market operated by the ASX.
The Company will be valued at approximately $A70 million based on the offer price of 20 cents per share at the maximum subscription of $20 million under the prospectus.
The Company existing operations are located in Jiaxing, Zhejiang Province, China, where the Group is predominantly focused on developing a mixed-use commercial and residential property project known as the Jiayuan Central Plaza Project in the heart of a fast developing local town, Wangjiangjing in Jiaxing. The Company has also entered into agreements in respect of three property developments in NSW, in Austral, the Hunter Valley and Marsden Park.
- The Company, through its subsidiary Boyuan Investment Holding Pty Ltd, has entered into agreements to acquire two parcels of land in the Hunter Valley Region of New South Wales, for the purposes of commercial property development.
- The Company, through its subsidiary Boyuan Real Estate Holding Pty Ltd, has entered into an agreement to acquire a plot of land in Austral, NSW for the purposes of residential property development.
- The Company has entered into an agreement to acquire the rights to an option to acquire a plot of land in Marsden Park, NSW for the purposes of residential property development.
- The Company is also party to a sales and marketing agreement in respect of two property projects located in Lindfield and Marsden Park, NSW.
Commenting, the CEO of Boyuan Holdings Limited, Mr Yading Wan, said:
“Achieving a listing on the Australian Securities Exchange will be a key milestone for the Company as we expand into the Australian property development market. We see Australia as a key part of our international strategy. We believe that Australia’s combination of a stable government, a strong housing sector and skilled workforce provide Boyuan & our investors with significant opportunities.”
Boyuan Holdings Limited ASX: BHL
The Offer opens on 14 September 2016 and will close on 30 September 2016, with trading expected to commence on the ASX on 21 October 2016.
Details of the Offer are contained in the Prospectus lodged with ASIC. BlueMount Capital, with offices in Australia and Asia, is the Australian lead manager for the offer.
Investors interested in applying for shares will need to complete the Application Form in the Prospectus once the Offer opens. Investors should consider the Prospectus in its entirety and obtain professional advice before deciding whether to invest in the Company.
Once the offer opens, the Prospectus can be downloaded from BlueMount Capital’s Website at: www.bluemountcapital.com/BHL
Key Offer Statistics
- Offer Price per share $0.20
- Maximum number of shares available under the Offer 100 Million
- Total number of shares (and equivalent shares) on issue as at the date of this Prospectus 250 Million
- Number of shares on issue following the Offer based on maximum subscription 350 Million
- Market capitalisation at Listing based on maximum subscription $70 Million
- Offer Timetable 14 September 2016 – 30 September 2016
- Offer opens 14 September 2016 Offer closes
- 30 September 2016
- Trading expected to commence on the ASX 21 October 2016
About Boyuan Holdings Limited
Boyuan Holdings Limited (“BHL”) conducts property development and management through its Chinese subsidiary (Jiaxing Boyuan Real Estate Development Co., Ltd) in Jiaxing, Zhejiang Province, China. It has recently completed the development of a mixed-use property complex, known as the Jiayuan Central Plaza Project, located in Jiaxing City, Zhejiang Province, China. BHL is currently focusing on future property development opportunities in Australia, in Marsden Park, the Hunter Valley and Austral NSW.
For more information on Boyuan Holdings Limited, visit: www.boyuan.com.au
China Dairy Corporation Limited (“China Dairy or “the Company”) today announced the successful closure of its ASX IPO following solid demand from a broad range of investors raising A$17 million.
At the offer price of A$0.20 per Chess Depository Interest (“CDI”), China Dairy will have a market capitalisation of approximately A$147 million.
BlueMount Capital was the lead advisor to China Dairy Corporation.
The strong response to the IPO reflects the positive long-term fundamentals for the dairy industry, driven by Chinese consumers’ growing demand for high quality food products, including dairy products. Current milk consumption in China stands at about 20kg per capita, less than a quarter of the average world consumption level(1).
China’s relaxation of its one-child policy has also led researchers1 to estimate that the country will see an average net increase of 3 million people per year and a corresponding RMB 20 billion spent in increased demand for infant formula milk.
The robust pull factors are accompanied by a renewed push by the Chinese government to further modernise agriculture through incorporating new technologies throughout the agricultural value chain to improve productivity, as articulated in the Government’s recent 13th five-year plan.
China Dairy’s Mongolia-based Research & Development facility, which is currently being developed, will underpin the Company’s strategic focus of innovation.
Final allocation and allotment of CDI’s has now been completed. Trading is expected to commence on the 8 April 2016 under the ticker code CDC.
(1) China Agri Research, 8 Jan 2016 “Analysis and forecast on China’s dairy industry” http://en.cnagri.com/report/dairy/20160108/252923.html
About China Dairy Corporation
China Dairy Corporation (“CDC”) is a leading producer and wholesale distributor of raw milk in China; as well as breeder and seller of dairy cows.
Established in 2005, China Dairy Corporation has over 160 employees located in the Company’s operations in China.
Through a number of acquisitions, CDC has grown to become a large dairy farming operation and milk producer in China, with more than 40,000 cows owned by the Company and its partners providing it with an aggregate raw milk production capacity of over 600 tonnes per day.
CDC operates a diversified business model through which the Group expanded beyond breeding company-raised cows, to also outsourcing cattle-raising to farmer-raised and farmer-owned cows – which provides additional revenue streams through the wholesale of raw milk.
The Group has shown consistent historic growth over recent years with FY2015 revenues reaching A$79.1 million and total comprehensive income reaching A$39.5, representing a compounded annual growth rate (CAGR) of 19% and 20% respectively since FY2013. CDC’s FY2015 net profit margins of approximately 50% give it the highest profitability margins when compared to other ASX-listed dairy companies.
For more information on China Dairy Corporation, visit: www.chinadairyco.com
 According to a collaborative report by the OECD and the Food and Agricultural Organisation of the UN.
BlueMount Capital is pleased to announce the Initial Public Offer for China Dairy Corporation is now available.
Key Facts & Figures
- Large producer and distributor of raw milk in China
- CDC and its partners have approx. 40,000 cows
- Very profitable approx.A$40 million NPAT FY2015
- FY2015 sales approx. A$80 million and cash at bank approx. A$70 million
- 10 year operating history
- Company intends to pay a interim and annual dividends in 2016
- Experienced board and management
- Key market: China
The Prospectus for the offer is available from BlueMount Capital and can be obtained via:
Open Date: 9 November 2015
Close Date: 5 January 2016
Minimum Investment A$ 2,000
A Prospectus for the offer of Chess Depository Interests (CDI’s) in China Dairy Corporation Limited (ARBN 607 996 449) (Company) a Hong Kong registered entity was lodged with ASIC on 30 October 2015. The Prospectus may be obtained by visiting www.bluemountcapital.com/CDC. Offers of the CDI’s are only made in the Prospectus.
Investors wishing to apply for CDI’s should read the Prospectus carefully prior to deciding whether to acquire the CDI’s. Anyone wishing to acquire the CDI’s offered in the Prospectus will need to complete an application form that will be in, or accompany the Prospectus. Neither the Company, the Lead Manager or the Corporate Advisor make any representations or warranty, express or implied, or provide any guarantee regarding the likely investment returns, the performance of the CDI’s or the Company, or the suitability of the CDI’s for any investor.
Please note that any advice given by BlueMount Capital (Sydney) Pty Ltd is GENERAL advice, as the information or advice given does not take into account your particular objectives, financial situation or needs. Therefore at all times you should consider the appropriateness of the advice before you act further.
Bosses Corporation Limited ( iBosses) the parent company of iBosses Singapore has announced the successful closure of its initial public offering following solid demand from a broad range of investors.
iBosses is a training and consultancy services provider focused on entrepreneurs and early stage businesses
At the offer price of A$0.20 per share, iBosses will have a market capitalization of A$23 million
Funds raised from the IPO will be used to expand the company’s business centres and to develop the iBosses digital platform
BlueMount Capital acted as Lead Manager and Corporate Advisor to iBosses