HONG KONG - Covid-19 is forcing banks to be creative. Morgan Stanley and Goldman Sachs on Wednesday launched an up to $288 million Hong Kong initial public offering for Chinese cancer-drug developer InnoCare Pharma, with a twist: the deal is doing away with the traditional multi-city roadshow, and will instead be marketed using video and phone calls. Oodles of time and money is spent flying executives and bankers around the world to sell stock. The virtual model adopted to deal with coronavirus fears could survive the outbreak.

Face-to-face meetings are out, and online conferencing is in. Chinese banks Haitong International and BoCom International last week completed a smaller $116 million Hong Kong share sale for television producer China Bright Culture. The deal, Reuters reported, was done by communicating with investors via video and telephone conferences. InnoCare’s sale is being run in a similar way, a person familiar with the matter told Breakingviews. That will leverage the ties of Wall Street banks with fund managers around the world.

The shift is welcome. Lengthy global tours have become a labourious staple of the IPO process. For many smaller domestic-focused companies going to market, it’s a once-in-a-lifetime opportunity to travel the world, ending with a decadent shopping trip on Fifth Avenue. But for bankers it is mostly a time suck. While they typically bill clients for their travel expenses, the trips involve hours wasted on planes with ropey internet connections, racking up their employers’ carbon footprints.

Some travel is unavoidable. Bankers must typically visit clients’ businesses for due diligence: advisors UBS and Standard Chartered got into trouble for failing to verify the forests in the 2009 listing of China Forestry. And on big deals, that are widely sold around the world beyond a handful of select buyers, investors might also want more direct interaction and relationship building with the management before writing big cheques. Still, for smaller issuers and their capital markets bankers, the end of the roadshow may be in sight.

CONTEXT NEWS

- InnoCare Pharma, a Chinese biopharmaceutical company that develops drugs for the treatment of cancer and autoimmune diseases, has launched a Hong Kong initial public offering of up to HK$2.24 billion ($288 million), according to a March 11 stock exchange filing.

- The company is marketing the deal through video or telephone calls, a person familiar with the matter told Breakingviews, avoiding face-to-face meetings to deal with coronavirus fears.

- China Bright Culture Group raised HK$900 million from a Hong Kong IPO without any of the usual face-to-face meetings, Reuters reported on March 7, citing unnamed sources.

- The company didn’t hold in-person meetings, instead communicating with investors in as many as eight video or telephone conference calls per day, the report added.

(Editing by Una Galani, Sharon Lam and Jamie Lo)

© Reuters News 2020