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UHNWs seek alternative fundraising as IPO market ‘seizes up’

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Asia’s U/HNWIs business owners are increasingly seeking non-bank financing amid a decline in capital raised and deals via Hong Kong’s IPO market, and a prolonged high interest rate environment, according to the regional head of EquitiesFirst.

Gordon Crosbie-Walsh, EquitiesFirst

“The last few years have been very strong for us. One of the reasons for that could be that as equity and debt capital markets basically seized up, UHNWIs found it difficult to tap new financing. We, therefore, became an alternative for a lot of major shareholders,” Gordon Crosbie-Walsh, Asia CEO at EquitiesFirst, an investment firm that specialises in asset-backed financing, told Asian Private Banker.

Headquartered in the US, EquitiesFirst has a focus on Asia Pacific, which represents approximately half of its global book, with more than 350 transactions in the region in the past four years. The firm services major shareholders of listed companies, which include founders, entrepreneurs, CEOs, board members, and other HNWIs.

“Apart from serving major shareholders in big firms, we also obviously have a lot of clients who are minority shareholders – and again, as these clients found it more difficult to access capital markets, they began to look to us,” he said.

“We provide interest rates of typically around 3% to 3.5% which can be fixed for up to five years, which is favourable compared to other major financing tools such as margin financing in some of the private banks,” he continued.

Crosbie-Walsh believes the firm requires a less stressed loan-to-capital ratio. “For some of the private banks or investment banks, their approach to risk management is different and the focus of their risk management review tools is different. For equities-backed financing, that means they are unlikely to be able to offer the same loan-to-value ratios compared with the 60% to 70% that EquitiesFirst can offer,” he shared.

In terms of the use of the financing, he said some clients intend to use the loans for refinancing, while others wish to use the proceeds for mergers and acquisitions to take advantage of current lower market valuations.

As the Asia Pacific CEO, Crosbie-Walsh leads the firm’s growth in the region from Hong Kong. EquitiesFirst has offices across Asia in Hong Kong, Singapore, Shanghai, Beijing, Bangkok and Seoul, as well as in Australia, the UK and the Middle East.

Prior to joining EquitiesFirst, Crosbie-Walsh was part of the leadership team at several investment banking businesses, including CM Financial and Jefferies Asia, as well as JP Morgan. Previously, he was also managing director and head of equities and equity sales in Hong Kong and China for Deutsche Bank and Salomon Smith Barney.

Newfound positivity?

In the first half of 2024, global IPO markets raised a total of US$51.6 billion across 513 deals. This marked a decline of approximately 20% in both funds and deal volume, compared to the first half of 2023, according to a recent KPMG report on Wednesday.

Global IPO funds raised. Source: KPMG

Among this, the Hong Kong IPO market raised a total of HK$11.6 billion across 27 deals, representing a decrease of 35% and 15% in funds and deal volume, respectively, compared to the first half of 2023. The TMT, consumer markets and healthcare / life sciences sectors once again led the market in terms of total funds raised, recording HK$4.6 billion, HK$2.8 billion and HK$1.5 billion, respectively.

During the quarter, Hong Kong welcomed its first IPO under Chapter 18C for specialist technology companies featuring a company equipped with an AI-powered drug research platform. Meanwhile, the China Securities Regulatory Commission (CSRC) recently introduced five measures, which include encouraging leading enterprises from mainland China to list in Hong Kong.

Furthermore, Hong Kong and the Middle East have been seeking to strengthen cross-border investment activities between the two regions. That could make Hong Kong an increasingly attractive destination for future listings from Middle Eastern companies.

“There is newfound positivity in the Hong Kong IPO market as evidenced by the surge in IPO applicants. This upsurge has been supported by the CSRC’s five measures and A-share applicants switching their IPO plans to Hong Kong. In light of this, we maintain a positive outlook for IPO activities to pick up in the second half of 2024,” added Irene Chu, partner, head of new economy and life sciences, Hong Kong, KPMG China.

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