NetEase, Inc. (NASDAQ:NTES) Seeks Second Listing As US Bill Threatens Delisting
Game developer NetEase began Hong Kong’s biggest stock sale so far this year on Monday, seeking as much as $3 billion in a listing as the U.S. weighs new rules that will push Chinese firms out of the New York stock market.
The Nasdaq-listed company is selling 171.48 million shares, or a 5% stake, which would raise $2.6 billion based on the Friday closing price of its American depositary receipts. The stake to be sold might rise to 5.7% if overallotments are exercised, boosting the proceeds to $3 billion.
The offering follows a similar move by Chinese e-commerce leader Alibaba Group Holdings to raise $13 billion late last year in a secondary listing in the city. Online retailer JD.com is predicted to open its share sale in the city next week to raise about $3 billion.
The flurry of secondary listings in Hong Kong return as U.S. senators last month approved a bill that might force Chinese companies to delist from the American stock markets if they fail to comply with the country’s regulatory audits for three consecutive years.
The bill, if passed into law, is probably going to accelerate the dual-listing trend in Hong Kong as 29 mainland firms with a total market value of $370 billion are eligible, according to Goldman Sachs.
When the bill become a law, it “could cause investor uncertainty for affected issuers, as well as us, the value of our ADSs [American depositary shares] might be adversely affected, and we may well be delisted from NASDAQ if we are unable to satisfy the public Company Accounting Oversight Board inspection requirement,” NetEase said in a filing to the Hong Kong exchange.
NetEase set a maximum price of 126 Hong Kong dollars ($16.30), or 6.2% above the last close of the ADRs, for the retail tranche of the offering. However, the final price of the whole offering, which will be determined after the close of subscription on Friday, can most likely be at a discount to the prevailing U.S. price, people familiar with the transaction said.
Alibaba, which saw significant demand for its secondary listing in Hong Kong, priced shares at a 2.6% discount to the last closing price of its ADRs and 6.4% below the indicative ceiling for retail investors.
NetEase’s ADRs closed Friday at $382.90 each, valuing the company at $49.4 billion. provided that 25 Hong Kong shares constitute one ADR, the offer shares are valued at HK$118.7 each, based on Friday’s close.
NetEase, is anticipated to invest proceeds in expansion and other online services, such as music streaming and online education. Credit Suisse, China International Capital Corp. and JPMorgan Chase are among the lead arrangers for the offering.
Chinese tech companies’ secondary listings will boost volumes at the Hong Kong stock exchange.
The city, which was the largest listing destination last year — and in seven of the past eleven years — with $40.24 billion returning to market, is fifth so far this year with just $3.4 billion raised, compared with $5.82 billion in the same period last year.
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
By the way, prices are vulnerable to a correction towards 349.60.
The projected upper bound is: 431.83.
The projected lower bound is: 367.60.
The projected closing price is: 399.72.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 28 white candles and 22 black candles for a net of 6 white candles.
A long lower shadow occurred. This is typically a bullish signal (particularly when it occurs near a low price level, at a support level, or when the security is oversold).
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 54.9896. This is not an overbought or oversold reading. The last signal was a sell 5 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 61.08. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 5 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 73. This is not a topping or bottoming area. The last signal was a sell 5 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 2 period(s) ago.
Rex Takasugi – TD Profile
NETEASE INC ADR closed up 14.690 at 397.590. Volume was 49% above average (neutral) and Bollinger Bands were 35% wider than normal.
Open High Low Close Volume 389.860 397.830 371.430 397.590 1,236,977
Technical Outlook Short Term: Neutral Intermediate Term: Bullish Long Term: Bullish
Moving Averages: 10-period 50-period 200-period Close: 385.21 347.49 311.30 Volatility: 72 59 54 Volume: 1,050,345 761,141 752,163
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
NETEASE INC ADR is currently 27.7% above its 200-period moving average and is in an upward trend. Volatility is Our volume indicators reflect moderate flows of volume into NTES.O (mildly bullish). Our trend forecasting oscillators are currently bullish on NTES.O and have had this outlook for the last 39 periods.
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