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IPOs: the future is virtual

By Jonathan Breen
12 May 2020

The Covid-19 pandemic has changed the way Asia’s equity capital markets operate, with virtual roadshows and deals finding enough success to outlast the coronavirus, writes Jonathan Breen.

For initial public offerings, roadshows are key as investors get face time with the listing company’s management. These typically include a global tour of multiple cities and hundreds of meetings. 

But travel bans, quarantines and general fear caused by the pandemic have dealt a serious blow to the usual rounds of face-to-face meetings.

Making the best of the circumstances has been important. Adapting to changing conditions even more so, with virtual roadshows gaining prominence. They are increasingly recognised not just as a way to navigate a crisis but also for the benefits that shifting more of the IPO process online can bring — with less time and money spent traveling a big selling point.

The idea is not entirely new. Digital communication has been increasingly used in IPOs to reach investors far from the world’s financial hubs. But to do the entire deal without a single face-to-face meeting is novel.

InnoCare Pharma’s Hong Kong IPO in March was the litmus test. It passed with flying colours, raising HK$2.2bn ($289m) from a deal mobbed by institutional and retail investors. 

While the firm was able to spend months nurturing investor relationships, the last stages of the IPO were done online out of necessity, including the roadshow, as Covid-19 roiled markets. But it shows what can be done with a simple video call.

“There is no reason you can’t do [deals] digitally; you don’t need to be there in the room,” says Rob Mumford, an investment manager for emerging markets equities at GAM Investments in Hong Kong. “So whether it be IPOs, or result calls or even how we are meeting with analysts now, it is really effective doing it digitally.”

There are different schools of thought on embracing virtual meetings in the equity capital markets in Asia. 

But even the most hard-core dissenters tell GlobalCapital Asia that there are clear benefits to going digital, not least when facing a crisis as severe as the coronavirus pandemic.

Soon after the lockdown of Wuhan, the central Chinese city seen as the root of the coronavirus, banks emptied across China and most non-essential businesses were closed, as people began working from home from around early February. 


Hong Kong’s bankers were hamstrung when travelling to the mainland by compulsory 14-day quarantines on their return. Within weeks, similar travel restrictions came into force around the world. The IPO market came to a standstill.

In Asia Pacific, Hong Kong was the hardest hit. 

From the Wuhan lockdown on January 23 until March 23, when this piece was written, there were 15 IPOs on the HKEX. Seven of these raised more than $20m and just two over $100m, according to Dealogic data. During the same period of 2019, 25 companies floated on the bourse — eight for over $100m and five above $200m.

As primary deal flow slowed, bankers had to come up with creative ways to continue doing business. They turned to virtual roadshows as a way of getting deals done. 

It is more than just a solution to a temporary problem, however. Instead, this way of executing deals marks a sea change in the region’s equities market. 


While digital is unlikely to replace face-to-face communication entirely, it is set to become a lot more prevalent once the Covid-19 situation comes under control. 

“This is like a trial to think about what you really need to travel for and what are some of the things you could do via the internet,” says Selina Cheung, a managing director on UBS’s equity capital markets team in  Hong Kong.

“I do think that a lot of future executions, after the mandate has been granted, could probably be done in an online format, aside from due diligence trips,” she adds. “I think that would be a good thing for the environment and for the banking industry as a whole to keep costs down.”

A pick-up in the use of digital communication could also potentially shorten marketing periods, says a Hong Kong-based head of ECM.

“We don’t need the management teams to be flying around anymore, which saves a lot of time,” he says. “We can have shorter deal roadshows and be able to do more meetings in a day.

“There are still going to be people who request to meet in person, but until then I think all of us, and the issuers and investors, are getting used to what could become the new normal,” he says. 

Others see similar benefits, but predict investors that are considering parting with large sums of money will want to meet the recipients at least once face-to-face.

Niccolo Manno, head of Asia ECM syndicate at JP Morgan in Hong Kong, says digital communication is effective in the execution and roadshow where you have a defined number of days to market to investors.

“But in the overall process, there will still be a need for major investors to meet a company’s management in person,” he adds. 

Cheung says there is merit to having face-to-face interactions when it comes to pitching clients for mandates, as a way to “build trust”.

A traditional IPO roadshow usually involves a team primarily made up of the company management and bankers, varying with the size of the deal and type of company. 

The usual pit stops include Hong Kong, London, New York, Boston and San Francisco, but video conferences and conference calls are used to contact investors at harder to reach locations, such as the Midwest region of the US. 

But the increased need for video conferences and other digital communication could encourage its use beyond just the fringes of the roadshow, says Ringo Choi, Asia Pacific IPO leader at EY in Hong Kong.

“The beauty of video conferencing is it saves time spent traveling,” he says. “If you have a meeting for three hours, sometimes you need to spend double or triple that time to get there or you need to stay overnight so that you can attend the meeting if it is in the morning.” 

Choi adds: “No one has a crystal ball, but my personal view is that the virus will change the eco-system and behaviour. [Video conferencing] saves travel time, reduces the cost of booking a venue and it means you don’t need a private jet, which you might use for a roadshow.”

asiaBankers use a number of online apps to conduct video calls and conferences. US-based Zoom Video Communications is a particular favourite. Chinese internet company Tencent Holdings saw the warning signs early, rolling out an international version of its own conferencing platform, Tencent Meeting, on March 21. This was a week after a ramp up of travel bans, quarantines and tumult in global markets.

Using any of the modern platforms typically means connecting through a laptop, tablet or TV, with the face of the speakers on the screen.

“For the time being, we are seeing a lot of this going on, including online conferences being done by our competitors and a lot of our investor education non-deal roadshows,” says UBS’s Cheung.

JP Morgan is among the banks to have held virtual conferences in the region this year, with one in Shenzhen, where over 200 institutional and corporate clients attended.

“We adapted a conference to go online and it was well attended,” says Manno at JP Morgan. “It was quite interesting to see both corporates and investors sitting in their living rooms and talking to each other.”

However, there are uncertainties about the use of digital communication and teething problems with the various methods being deployed.

EY’s Choi is even looking into potential legal issues.

“Some sensitive information, such as the working paper for an IPO, cannot be taken outside of China,” he says. “There is a law against it. But the China team might show a page from the working paper to the Hong Kong team or to bankers for analysis or data. So is that a violation of the law?”

Choi’s legal team also flag potential issues with ownership of the video or conference information from a video call. The platform used for the conference call could be in a position to use the information. But the issue is still new and being explored.

Not for all 

Not every issuer can enjoy the benefits of using digital techniques equally just yet.

For example, e-commerce firm Alibaba Group Holding switched many of its planned face-to-face meetings into phone calls for its HK$101.2bn secondary offering in Hong Kong in November 2019 after protests gridlocked the central business district.

But it was able to pull that off because of its ubiquitous name. 

“It is an existing stock, people know it and they know how it trades,” says a senior equity syndicate banker who worked on the transaction.

Being a simple product also helps. For United Hampshire US Real Estate Investment Trust’s (Reit) $324m Singapore listing in March, bankers were able to put video and regular conference calls to use because Reit investment is easy to understand. 

But a more complex proposition, say from a Chinese technology company, may be a harder sell. 

“If a founder or CEO needs to explain why his company is a great candidate, he’ll want personal exposure,” says Brock Silvers, a veteran China investor and a managing director at Adamas Asset Management in Hong Kong. “If less explanation is required, it may only need FaceTime instead of face time,” he adds, referring to Apple iPhone’s video call function.

But just because a company might need some extra explaining does not mean it can’t also use digital communication to do so, even if it is loss-making like InnoCare Pharma, says Silvers.

“In today’s environment, profitability may become even scarcer,” he says. “For those without it, video conferences may be a stumbling block. For those with sufficient track records or promise [like InnoCare Pharma], the lack of face-to-face meetings will not be prohibitive.”

Going a step further than that, Mumford at GAM Investments sees an actual meeting with company management as secondary when considering investing.

“Not meeting face-to-face, pressing palms, is not the major issue,” says Mumford. “When we go into an investment situation, we have a framework through which we look at a company. That is the traditional private equity approach to analysis, which includes looking at the top down picture, company positioning, valuation, management — increasingly in the context of broader [environmental, social and corporate governance] — and key milestones. 

“In any [face-to-face] interaction you are fleshing out those points to understand them a little better and get an additional sense of each key factor,” he adds. 

How virtual roadshows in IPOs evolve will depend on the duration of the Covid-19 pandemic and its aftershock. But the question is no longer whether digital communication will play a larger role in Asian IPOs — it is how big a role it will play. GC

By Jonathan Breen
12 May 2020