It looked like a tentative rebound at best, but the majority of stock markets in the region did finish higher yesterday as some investors deemed prices low enough to get back in.
Whether this will lead to more sustainable buying or investors will continue to sell into any further gains remains to be seen, but Taiwan’s Wintek Corp wasted no time trying to figure that out yesterday. Although its own share price fell 0.3% to a new 2012 low, the maker of LCD touch screens for handsets and tablets launched an offering of global depositary receipts (GDR) after the market close, with the aim of raising about $100 million.
While this is hardly the optimum time for the company to raise fresh capital — its share price is down 57% from the 12-month high in July last year — Wintek needs the money to fund a move into a new technology referred to as a one-glass solution, or OGS. The technology, which helps to make handheld devices thinner, is already used by HTC and Nokia, and is expected to be adopted by Apple for its upcoming iPhone 5. Wintek generated about 70% of its first-quarter revenues from sales to Apple, but in terms of market share it has been falling behind competitors in Korea and Taiwan, particularly TPK, that have already adopted the OGS technology.
The company applied to the Taiwanese regulators to do a GDR issue in February when its share price was trading above NT$25 and got the approval in April. It then did a roadshow in Asia, Europe and the US in May while looking for a window to launch the deal. In the meantime, its share price was following the general trend in global stock markets and edging gradually lower. Yesterday it closed at NT$16.35.
Even so it decided to go ahead and, according to sources, the deal did attract quite a lot of interest and ended up being well covered. Part of that may have been due to the fact that Wintek’s valuation has come down a lot, but there has also been a dearth of new Taiwan paper in the past 12 months. Aside from three convertible bonds, there have been no new equity issues this year and this is the first GDR sale since July last year when China Steel raised $743 million from an upsized transaction.
Wintek last tapped the equity markets in January last year when it raised $330.6 million from another GDR issue, which was upsized by 25% due to strong demand. That deal came on the back of a 150% share price rally in the previous six months and was priced at a 5% discount to the latest close.
Yesterday, Wintek sold 40 million GDRs, which equalled 200 million shares or 12.1% of the existing share capital. They were offered at a price between $2.50 and 2.58 apiece, which translated into NT$15 to NT$15.45 in local share terms and a discount of 5.5% to 8.3% versus yesterday’s close of NT$16.35. The price was fixed at the bottom of the range for the maximum 8.3% discount and a deal size of exactly $100 million.
The discount seems fairly generous for a deal that accounted for just 10 days of trading. However, in the current market environment it’s not particularly surprising that investors are trying to get as big a discount as possible.
Sources said the discount helped attract some hedge funds to the deal, but there was also good interest from long-only accounts and existing shareholders, as well as some demand from high-net-worth-type investors. Because the deal was well-flagged through the initial filing and the roadshow there had also been some reverse inquiries leading up to the launch, which helped build some momentum and the bookrunners were able to go out with a “books covered” message at least 30 minutes before the books closed at 5pm. The books were open for about 90 minutes.
The deal was open to US investors, but given the time of day, the majority of the demand came from Asia. Overall about 30 investors bought into the deal.
Morgan Stanley was the sole bookrunner both for this latest offering and the previous GDR in January last year.
