Hapag Lloyd shares started trading on Friday.
Update: Little movement in share price during first day of trading as listed company
SHARES in German liner operator Hapag-Lloyd debuted on the Frankfurt Stock Exchange today.
By closing time on the Frankfurt Stock Exchange, shares in the company were trading little above their opening price at €20.18, after rising to €20.26 at one point during the morning.
Given the timing of the share listing and other events of the day, Hapag-Lloyd will no doubt be pleased for any positive movement in the price.
The date of the first trading is hardly auspicious, following a weak set of results from Maersk Line, which today announced it had made a profit of only $264m in the third quarter, down 60% on a year earlier.
Hapag-Lloyd’s path to the market has been one of unfortunate timing. The company first priced its IPO at €23-€27 but following a profit warning by Maersk Line was forced to extend the IPO period by a week and reduce the offer range to between €20-€23. Weak uptake by investors meant it only brought in the bottom end of that range, placing 15.2m shares, including a 15% overallotment.
“We are satisfied with the interest of investors and the demand for our shares”, said Hapag-Lloyd chief executive Rolf Habben Jansen. “Despite a challenging market environment we successfully have been able to complete this important step.”
In a statement, the company said it would use proceeds from the issuance of 13.2m new shares for investment in vessels and containers.
“The core shareholders Kühne Maritime and Compañía Sud Americana de Vapores participated with $30m each in the capital increase as part of their cornerstone agreement,” the company said. “The 1.9m over-allotment shares are provided from the existing holdings of Tui. Subject to the full exercise of the greenshoe option, the total placement volume amounts to approximately $345m.”
Hapag-Lloyd will publish its third-quarter results, its first as a listed company, next Wednesday.
Hapag-Lloyd had originally hoped to raise around $500m from its IPO but was forced to both delay the IPO and lower its expectations after Maersk announced a surprise profit warning for its liner division.
The hand of Maersk was felt again earlier this week when the Danish line announced on Wednesday that it was reducing its workforce by 4,000 staff and was cancelling or delaying a number of ship orders.
Along with other global lines, Hapag-Lloyd has been suffering from poor rates on the key Asia-Europe trade lane. Spot rates from the Shanghai Containerised Freight index fell back again by 30% this week, following GRIs announced at the beginning of November.
In an effort to counteract this, Hapag-Lloyd this morning announced a further Asia-Europe GRI of $650 per teu effective from December 1.
But with today’s spot rates at $674 per teu, it remains to be seen whether shippers will acccept what is almost a100% increase in rates, or how long that rate would hold in what is the off-peak season in a year that saw no peak season.
“The timing of the Hapag-Lloyd IPO was very poor, and its existing shareholders will have to mark down the value of their existing stakes,” said Alphaliner analyst HJ Tan. “The weak offer price for the Hapag-Lloyd will have a significant impact on the valuation of the existing shareholders’ stake in the company.”
Alphaliner added that the four main shareholders — CSAV, City of Hamburg, Kühne Maritime and Tui — might have to revalue their investments in Hapag-Lloyd to reflect the lower market value of their shares.
At the offer price of €20 per share, CSAV’s 34% stake in Hapag-Lloyd is valued at €713m ($778m), compared to a book value of €1.6bn at the end of June, implying an impairment loss of some €953m for its existing shares.
Tui’s existing 13.9% stake in Hapag-Lloyd, representing 14.5m shares, would similarly be impaired, Alphaliner said. The stake is currently classified as “financial assets available for sale” at a value of €489m, but would only be worth €291m at the lower end of the IPO offer price, implying a potential hit of some €192m for Tui.
Tui was supposed to offer up to 2.3m shares in Hapag-Lloyd under a share placement option, but this option has now been removed due to the poor market reception for the IPO. However, Tui is still offering up to 1.8m shares from its existing shareholdings to cover any potential over-allotments, and will have to recognise an immediate loss of the sale of these shares.
Hamburg and Kühne Maritime do not disclose the book value of their shareholdings but will have also suffered similar setbacks.