Wanda Commercial soars on plans to take the company private

Shares of Dalian Wanda Commercial Properties Co Ltd soared more than 18 percent on the Hong Kong Stock Exchange on Thursday after its parent Dalian Wanda Group said it was considering taking the company private just 16 months after listing.

The stock surged 18.43 percent to close at HK$45.95 ($5.93). Meanwhile, the benchmark Hang Seng Index edged down 0.13 percent, or 26.69 points, to close at 20,776.70.

Dalian Wanda, established by billionaire Wang Jianlin, said in a statement on Wednesday it was looking into buying all of its shares back for HK$48 a share, the offering price it listed, marking a 24 percent premium to its Wednesday close.

Analysts, however, were unsure of the motive.

Du Jinsong, an analyst at Credit Suisse Group, said the move may indicate that Wanda believes the A-share market is sufficient to feed its funding demand. As the company is more likely to acquire higher valuation among A-share investors, listing on the mainland may have become a preferred choice.

Du added overseas equity and debt capital markets are less and less attractive to mainland companies because the swift development of onshore bond market as well as the increasing volatility of the yuan exchange rate.

Yet, he doesn't expect many developers to follow suit.

But other analysts said the developer may actually aim at saving its share price rather than delisting in Hong Kong.

"Domestic money is cheap now, but the Hong Kong stock market is still an important channel of overseas funding. There is no need to shut it in a rush," said Philip Tse, analyst from BOCOM International Holdings Ltd. "Duel listing is perfectly acceptable, if Wanda wants an A-share IPO as well."

"The announcement is more likely to be Wanda's gesture to support the share price," Tse said, adding the sentiment has been sluggish for the developer. "It may remain at a relatively high level even if the intention is clarified later, given the company has vowed to buy back on or above HK$48.

"It may help mainland listing as well, because investors would take H-share price as a reference," he added.

Wanda Commercial stock hit a high of HK$76.8 in mid-2015. But it has been trading under HK$48 since late November and bottomed at HK$31.55 on Feb 25. The company is in the queue for an IPO on the mainland. Its application to the China Securities Regulatory Commission disclosed on Nov 13 shows a plan to issue no more than 250 million new shares and raise as much as 12 billion yuan in the A-share market.

"It may still make sense for the company to privatize at the offer price or above, as asset prices have gone up a lot in the past year," said Samson Man, analyst from CMB International.

"However, minority shareholders who bought the stock at its peak of above HK$70 may vote down the plan. In the past three years, only two mainland developers initiated delisting and only one succeeded," Man said.