Razer IPO priced at top end of range

Razer co-founder and CEO Tan Min-Liang at a news conference last month ahead of the firm's IPO in Hong Kong. The Hong Kong public tranche was 289 times oversubscribed, with 21 million people placing orders, local media reported. Mr Li Ka Shing, Hong
Razer co-founder and CEO Tan Min-Liang at a news conference last month ahead of the firm's IPO in Hong Kong. The Hong Kong public tranche was 289 times oversubscribed, with 21 million people placing orders, local media reported. Mr Li Ka Shing, Hong Kong's richest man, has been one of Razer's early backers.PHOTO: REUTERS

HK$3.88-a-share move comes after Hong Kong public tranche is 289 times oversubscribed

A huge response from Hong Kong retail investors has prompted Singapore-based gaming tech firm Razer to price its initial public offering (IPO) at the top end of the range it initially outlined.

The Hong Kong public tranche was 289 times oversubscribed, with 21 million people placing orders, local media reported.

That has led Razer to price the shares at HK$3.88 (S$0.68) each, Bloomberg reported yesterday, citing sources.

That is near the top of the range of between HK$2.93 and HK$4 a share the company cited during its investor roadshows.

The huge response compares with Tencent's China Literature, which was 623 times oversubscribed, while ZhongAn Online P&C Insurance's listing in September was 393 times oversubscribed.

Razer's IPO size is 1.06 billion shares. Of this, 10 per cent was offered to the Hong Kong public. The rest was offered through an international placement, targeting mainly institutional investors and high-net-worth individuals, including those in Singapore.

Both tranches closed on Monday. Because the retail allocation was more than 100 times subscribed, under Hong Kong's clawback mechanism, 50 per cent of the IPO tranche will be allocated to the public, instead of the 10 per cent initially on offer.

The institutional tranche, which was also oversubscribed, has been reduced to 50 per cent.

Mr Li Ka Shing, Hong Kong's richest man, has been one of Razer's early backers. The firm's name in Mandarin is "Thunder Snake" and its shareholder list is not short of star power, with names like GIC.

Mr Ke Yan, an insight provider on Smartkarma, noted: "I think Hong Kong investors buy the Li Ka Shing story. To comprehend the enormous oversubscription ratio observed in this Hong Kong IPO, one should understand that there is a subtle difference between Hong Kong's and Singapore's public tranches.

"In Hong Kong, retail investors can use broker-facilitated leverage to subscribe to IPOs, which is an important tool for hot deals like this. Even with such leverage facilities, retail investors might just get allocation of one lot (1,000 shares) in most cases."

Mr Ke added that Razer is expensive based on mainstream valuation metrics. It sells laptops and premium gaming peripherals such as high-precision mouses and customisable keyboards. The United States is its biggest market, accounting for half of group revenue.

Based on an IPO price of HK$3.88 a share, Razer would be valued at HK$34.4 billion, assuming the over-allotment option for 160 million shares is not exercised.

Mr Ke wrote in a note last week: "The Lenovo Group is valued at US$6.5 billion (S$8.9 billion). Yet Lenovo's revenue is 100 times Razer's revenue."

The Razer Phone, launched last week in the company's first foray into the mobile device market, has drawn mixed reviews. "The chance is high that it could take a few iterations for Razer to get its mobile phone right," said Mr Ke.

Razer is an "extreme case of a cross-border listing", he added, with most of its pre-IPO investors in Singapore and a majority of its business from the US.

Razer plans to commence trading on the Hong Kong bourse next Monday.

A version of this article appeared in the print edition of The Straits Times on November 08, 2017, with the headline 'Razer IPO priced at top end of range'. Print Edition | Subscribe