Two shareholders in Youku Tudou and Soufun Holdings took advantage of the recent gains in internet-related stocks at the end of last week to monetise all or part of their holdings in the two US-listed Chinese companies.
Sennett Investments, which is an affiliate of Temasek Holdings, sold its remaining 6% stake in internet video site Youku Tudou, raising $184.8 million, while private equity firm General Atlantic sold close to 20% of its holdings in real estate-focused internet portal Soufun, pocketing $124.2 million. Credit Suisse was the sole bookrunner for both transactions.
The two deals launched after the end of US trading on Thursday, which meant they hit the market at roughly the same time as Twitter announced that it had filed a listing application with the US regulators. According to market speculation, the IPO could happen before the end of this year and is expected to value the popular messaging service at between $10 billion and $15 billion. Analysts say that anticipation ahead of this listing and also of Alibaba’s upcoming IPO is at least in part responsible for the recent valuation pickup in internet stocks.
When the sell-downs launched, Youku Tudou had risen 16% in the past month and Soufun was up 30.9%. Both were slightly off their 2013 highs.
According to a source, there was quite good interest for the deals, from US as well as Asian investors, and both vendors were able to fix the price at the top of the indicated range when the order books closed at 8:30pm on Friday Hong Kong time.
Their after-market performance on Friday was completely different, however. Youku Tudou rallied 8.9% to a year high, while Soufun fell 4.1% to finish below the placement price. It was the third consecutive day of losses for the real estate portal, which fell 5.5% on Wednesday and 6.4% on Thursday. It had gained 10.9% to reach a record high on Tuesday last week.
Youku Tudou
Youku Tudou, which runs an internet platform similar to Youtube where users can watch and share video content, was created in August last year following a merger between former rivals Youku and Tudou that was valued at more than $1 billion.
Temasek sold 7.7 million American depositary receipts (ADRs), or its entire remaining stake in the company. The shares were offered at a price between $23.80 and $24.00, which translated into a discount of 2.6% to 3.4% versus last Thursday’s close of $24.65.
The price was fixed at the top of the range for a 2.6% discount.
A source said there was more interest than usual from Asia-based investors, which reflected the revival of the US tech sector in general. However, as is typically the case for block trades or follow-ons in US-listed stocks, the majority of the demand came from US accounts.
There was no further information about the number of orders or what type of investors participated in the transaction.
The 8.9% gain on Friday took Youku Tudou to a post-merger high of $26.83, exceeding the previous high of $25.48 from early August.
Soufun
Through its websites, Soufun provides value-added services including marketing, e-commerce and property listings for China’s real estate sector. In 2012 it was the country’s leading real estate internet portal based on the number of page views and visitors.
The deal comprised 2.7 million ADRs, which accounted for about 4.8% of the company. They were offered at a price between $45.75 and $46.00 apiece, which translated into a discount of 2.85% to 3.4% versus Thursday’s close of $47.35.
It too was priced at the top, resulting in a final discount of 2.85%.
The vendor, General Atlantic, is the company’s single largest shareholder with a 24% stake prior to the sell-down, according to Soufun’s website. Following the deal, the private equity firm will still own about 10.8 million ADRs, or a 19.1% stake, which, based on Friday’s closing price, is worth about $490 million. Its remaining shares will be locked up for 60 days.
Again there was no information about who bought the shares but the fact that the stock finished 1.3% below the placement price on Friday suggests that not all of the buyers were long-term holders. The source said this deal also saw good demand from Asian investors, although not as strong as Youku Tudou.
Friday’s close of $45.41 left the stock 15.1% below the record high of $53.51 that it hit last Tuesday.
The improvement in equity markets in the past couple of weeks has seen investors switch out of defensive stocks and into higher beta sectors and bankers have been trying to source block trades to meet this demand. There were quite a few such deals in Asia last week, although several of them were well below $100 million. And, after seeing four deals in one night the previous week, including Bank of America Merrill Lynch’s $1.47 billion sale of its remaining stake in China Construction Bank, the market did feel a bit less active.
