London-based glitzy jeweler “Graff Diamonds Corp”. has decided to postpone its US$1 billion initial public offering in Hong Kong, citing adverse market conditions just one day before it was scheduled to price the deal.
Graff's deal was widely viewed as a high-profile test of investors' appetite for new shares, and is the largest IPO to be withdrawn in Asia so far this year after the Facebook‘s post IPO saga, that undermines some investors interest towards IPO.
Weakness in global stock markets amid concerns about Europe's debt crisis and a more-than 10% decline in Hong Kong's benchmark Hang Seng Index so far this month have also hurt investors' appetite for new listings, and the postponement of Graff's IPO also comes as New York-based diamond ring specialist “Tiffany & Co.” cut its outlook for the year, citing lower sales growth in American market.
"Consistently declining stock markets proved to be a significant barrier to executing the transaction at this time," Graff said in the statement.The IPO of this highly sophisticated and impressive jeweler founded by Laurence Graff in 1960 and Rothschild, the financial advisor, has been closely watched, as the company's June 7 listing was set to be the latest by a foreign firm in Hong Kong after Italian luxury house Prada Spa went public in the city last year.
Hong Kong was the world's top venue for IPOs by value in the last three years, but the city's largest deal so far this year, the US$1.8 billion offering by Chinese brokerage Haitong Securities--pales in comparison to Facebook's US$16 billion deal.
"Investors are hesitant to buy new offerings given the declining market conditions, particularly if the valuation of an IPO isn't attractive enough," said Ben Kwong, associate director of Taiwanese brokerage KGI Asia Ltd.
Graff had been selling its shares at HK$25 to HK$37 each, translating to 18-24 times 2012 forecast earnings and valuing the company at up to US$4 billion.
The highest end of Graff's price range puts it on par with Prada, which trades at 24 times its 2013 fiscal forecast earnings. Graff has 18 directly operated and 13 franchised stores and had sales of US$755.6 million last year, up 23% from US$616.7 million in 2010. While its net profit was US$115.6 million, up 10% from US$104.7 million, according to the prospectus.