AIA gains 17.1% on day one, greenshoe exercised

https://www.financeasia.com/article/aia-gains-17-1-on-day-one-greenshoe-exercised/237150

In light of the offering price and the massive demand for the initial public offering, AIA Group’s 17.1% gain on the first day of trading was perhaps not a huge surprise, but still noteworthy for a listing of this size. And the bookrunners were so confident that the gains will be sustainable that they decided to exercise the greenshoe in full after the close.

This means the deal size was increased to $20.5 billion, making the pan-Asia life insurer the third largest IPO in the world ever, behind Agricultural Bank of China and Industrial and Commercial Bank of China, which raised $22.1 billion and $21.9 billion respectively. The deal had already claimed the records as the largest insurance sector IPO, the largest Hong Kong listing and the largest listing on a single exchange – both ABC and ICBC listed part of their shares in Shanghai, leaving the Hong Kong portion of their offerings at $12 billion and $16 billion respectively.

AIA opened at HK$22, which was already 11.8% above the IPO price of HK$19.68.

There also appeared to be some rotation from other Hong Kong listed insurance companies into AIA, as China Life Insurance fell 3% and Ping An Insurance (Group) lost 2.5%. A key reason for that would have been AIA’s cheaper pricing and expectations that the valuation gap between it and the Chinese insurers was bound to shrink.

The exercise of the greenshoe means that the free-float will increase to 67.1%, which suggests there should be sufficient trading in the stock, even if many investors will buy and hold and $1.92 billion of the shares are tied up with five cornerstone investors for six months. All the shares were sold by parent company American International Group, which is raising money to repay the US government for the $182.3 billion bailout it received in 2008. AIG is expected to sell its remaining 32.9% stake once the lockups expire. It can sell 50% of the shares after 12 months and the rest after 18 months.

Prior to the trading debut, AIG had sold 5.857 billion AIA shares, or 48.6% of the company, as part of the base offering and another 1.17 billion shares through a 20% upsize option that was exercised in full, resulting in a free-float of 58.4% on day one. The shares were priced at the top of the HK$18.38 to HK$19.68 price range for a total market value of $30.5 billion. After the first day, that has now increased to about $35.7 billion.

5.857 + 1.17 + ? = 8.08

8.08 * 19.68 / 7.8 = 20.4billion