An important component of the IPO process is the international road show. Undertaken by the company and its sponsoring investment bank. This is an opportunity for institutional investors to come along and get up close and personal with the founders and speak to them about the prospects of the company and get some context on the numbers contained in the legally factual prospectus filed with the Stock Exchange Commission (SEC) filed in New York. In many cases particularly when the deals are smaller, an electronic pre-recorded version will be substituted. Whilst it is never an ideal replacement it does go some way to conveying the passion alongside the fundamentals of the founders and their offer. The Huami Road Show.
The markets have continued their sell off from Friday. With the Dow Jones Industrial average dropping a further 355 points. But something interesting is happening alongside this blood bath. Consumer Tech stocks Apple and Amazon and Chinese ADRs are jumping. An ADR is American Depositary Receipt or Share and it is a way for a foreign held company like Huami to be listed on an American Exchange. In the prospectus that a company files it has to describe exactly how many ADRs are being issued and how they relate to the ordinary or preference shares held by the company.
Lately the performance of Chinese ADRs have lagged the market. That may be because when they had their IPO the market was already approaching its peak valuation they were considered overvalued relative to that. Look at the past 3 months of valuation of Chinese ADRS against the three major US indices. What you will see is that they have massively underperformed by as much as -44%. However today with the continued sell off across the board. Amazon and Apple and a few of these Chinese ADRs seem to be bucking the trend. Holding and increasing their value in the case of Hexendai (HX) by +11%.
This is a positive sign that the market is seeking a bottom in undervalued consumer tech stocks. It also seems to me that provided we’ve reached that bottom it provides a good platform for a new Wearable Tech consumable to enter the market on Thursday and perform. Let’s have another look at the end of the trading day. But this is the current word on the street.
Huami Corporation (Nasdaq: HMI) — Checks just completed, are currently revealing, according to underwriter guidance the deal is oversubscribed. We are hearing that the vast majority of the early book build is from Asian investors which is quite typical of Asian deals. It should be noted that this company has been the sole partner of Xiaomi Corporation, or Xiaomi, a highly popular mobile Internet company and global consumer electronics brand in China. Additionally, along with Xiaomi’s investment (19.3% stake)….Shunwei Capital is also an investor (20.4% controlling stake). Shunwei is a VC firm that Xiaomi CEO Lei Jun co-founded.