Euromoney, March 8 2019
A follow-on deal for a southeast Asian internet company this week illustrated just how much investor appetite there is for digital stocks in Asia – particularly if the name Tencent appears in the shareholder list. Few companies see an increase in their share price right through a primary follow-on, particularly when their value has doubled since the start of the year anyway.
Sea Limited is a Singapore-based internet company and the operator of southeast Asia’s biggest gaming platform. It is backed by Chinese internet and gaming company Tencent, which held about 40% of the company’s stock at the time of its 2017 IPO.
This week it raised $1.35 billion in a follow-on offering through Morgan Stanley and Goldman Sachs as joint bookrunners. They set out to sell 50 million shares and eventually upped to 60 million, 6.3 million of them to a Tencent affiliate and a firm linked to one of Sea’s directors.
The follow-on was striking because of the movement of the share price from its IPO and through the follow-on. It raised $884 million in its New York IPO in October 2017 for $15 apiece, and its share price initially declined, trading around the $10 as recently as the start of 2019.
The stock began to climb around the turn of the year, rising 43.1% from January 1 to February 26. It then announced its full-year results, and went up another 34.9% within a day. It announced its follow-on offer on March 1 at $22.50 per share, a 4.65% premium to the previous close, then rose another 7.91% on the day of the announcement, meaning the follow-on eventually priced at a discount. At the time of writing on March 8, the share price was up 133% in a little over two months – having continuously priced upwards all the way through a follow-on, a highly unusual state of affairs.