Alibaba-funded logistics and supply-chain company Best Inc. sent a worrying signal to the market after it slashed the size of its initial public offering and priced at the low end of its expected range.
Just Monday the Chinese company was planning on raising about $870 million, but that’s down to around $450 million now. At the end of August the company was indicating a $1 billion IPO.
It’s a sure sign of lackluster demand and Alibaba (BABA) might jump in and support the offering on the open market.
Best will trade on the New York Stock Exchange as BSTI.
Here’s what you need to know.
1. A Once Billion-Dollar Deal Is Down to $450 Million
Best sold a total 45 million American Depositary Shares (ADSs) at $10 per share, the low end of an already lowered expected range.
That’s much smaller than the $869.4 million expected just a couple of days ago. Best planned to price 62.1 million shares between $13 to $15 a share.
Majority shareholder Alibaba said it may chip in and buy up to 150 million of ADSs on the IPO terms, the company said in its latest filing.
It’s still a big China offering and the big hitters are underwriting. The lineup of lead underwriters are Citigroup, Credit Suisse, Goldman Sachs, J.P. Morgan and Deutsche Bank.
CITIC CLSA, KeyBank Capital, Oppenheimer and Stifel are co-managing the deal.
As part of the overallotment, “certain” selling shareholders and the company grant the underwriters rights to buy an additional 6.75 million ADSs.
After fees and discounts, the company expects to take in $447.3 million.
It will use:
- Up to $65 million in tech infrastructure investment.
- Up to $200 million expanding its logistic and supply chain network and Best Store+ network.
- The rest of general corporate purposes.
Since its inception on July 5, recommended stocks by Stirling Strategic Investor have returned 6.62% by Sept. 11 vs. the S&P return of 3.32%.
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2. What Best Does
There are a lot of Bests out there, although not the catalog store nostalgic Virginians such as myself…