Daikiya Group Holdings, a Japanese cuisine restaurant chain based in Hong Kong that shelved its share listing on the Hong Kong Stock Exchange on Wednesday, was the first initial public offering to suffer from the outbreak of the novel coronavirus.
The epidemic will inevitably affect catering businesses of companies like Daikiya, which will need to deal with more challenges if they want to go public at difficult time like this, said Linus Yip Sheung-chi, chief strategist at First Shanghai Securities.
The epidemic will inevitably affect catering businesses of companies like Daikiya, which will need to deal with more challenges if they want to go public at difficult time like this
Linus Yip Sheung-chi
chief strategist at First Shanghai Securities
Protests and riots in the city since June also have taken a toll on the group’s business. Daikiya said in its prospectus in January that mainly because of social unrest in Hong Kong, its year-to-year profit dropped 66.1 percent, from HK$37.5 million ($4.83 million) to HK$ 12.7 million for the four months ending July 31, 2019.
Daikiya also predicted its net profit for the year ending March 31 is expected to decline significantly from a combination of factors, including social unrest and high operational costs.
The group said in an exchange filing on Wednesday that it decided not to proceed with the share offer and its proposed listing on the main board of the Stock Exchange of Hong Kong after careful consideration of prevailing market conditions.
The virus outbreak is hitting local catering and retail industries hard. This would bring risks to related companies that plan to go public, said Ringo Choi, Asia-Pacific IPO leader at EY.
He predicted that companies who halted listings amid the virus outbreak might lower their valuations after they resume their listing plans.
The restaurant chain planned to raise as much as HK$200 million in its prospectus with a share price of HK$1.6 to HK$2. Investors who have applied to subscribe to the new shares will be refunded in full without interest.
The 2019-nCoV epidemic has cast a shadow over the world’s top IPO market as some mainland companies, including JD and Baidu, have postponed their second-listing plans in Hong Kong.
However, there are quite a few new shares lining up for listings in Hong Kong that show that companies remain confident about going public in Hong Kong, Choi said. He expects Hong Kong IPOs will raise a total of HK$250 billion this year.
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