The closure of China's initial-public-offering market used to be what kept mainland-focused private-equity investors up at night. Now, it's the reopening of that exit path that's cause for concern.
'I do fear momentum in China, I do fear if the handful of these IPOs are hot, the index goes up in a straight line,' Derek Sulger, a partner at Lunar Capital, said at a Mergermarket-EY conference on Asia's maturing private-equity market in Hong Kong this week.
Most private-equity firms rely on IPOs to exit their investments in the world's second-largest economy. But in late 2012, the China Securities Regulatory Commission halted approving IPOs while it hashed out changes that would make IPOs more registration-based rather than approval-based.
China-focused private-equity firms have been stuck holding investments, in part due to the closure of the IPO market. Although private-equity firms can also sell companies to one another, or specialist buyers, that is uncommon in China. Private-equity firms typically take minority stakes in companies in China, giving them less say in how and when to exit a company.
Sitting on investments has become a concern for private-equity firms, which like to at least have the option of cashing out within a few years. Over the past 10 years, about 9,000 deals have been done in China, but in more than 7,500 of those cases, investors haven't cashed out, according a 2013 report from Shenzhen-based private-equity advisory China First Capital.
With IPOs coming back, private companies, many of which have financial backing from private-equity and venture-capital backers, could raise as much as 250 billion yuan ($41 billion) this year through as many as 300 offerings, according to PricewaterhouseCoopers.
For advisory firm EXS Capital Group Chief Executive Eric Solberg, the reopening of China's IPO market is 'bittersweet' -- it will likely boost deal flow as private-equity players see a clear exit path, but company valuations are likely to rise.
'My fear is that the IPO market heats up too fast and both the retail market and the entrepreneurs start having unrealistic expectations again, ' said Mr. Solberg.
In Greater China, there have been signs of enthusiasm for new deals, particularly in the private-equity friendly retail sector. In Hong Kong, for example, the $48 million public float of babywear maker Miko International Holdings. Ltd. this month was 1,125 times oversubscribed in the retail investor component of the deal, a person familiar with the situation said.
Lunar Capital合伙人苏尔杰(Derek Sulger)本周在香港参加由Mergermarket和安永(EY)主办的会议上表示，中国市场的能量确实令他感到担心，他确实担心一系列IPO带来的热度将导致股指直线飙升。
“套现难”已经成了私募股权公司面临的一个问题，这些公司希望至少能有在几年内套现的选择。总部位于深圳的私募股权咨询公司中国首创(China First Capital)去年发布的报告显示，过去10年内，在中国完成的私募股权交易约有9,000桩，但超过7,500桩的投资者还未能套现。
对于咨询公司EXS Capital Group的首席执行长索尔伯格(Eric Solberg)来说，中国IPO市场的重开是苦乐参半的。IPO重启将使私募股权公司看到清晰的变现途径，促使它们增加私募股权交易数量，但这也可能导致它们想投资的公司估值上升。
在大中华区，已有迹象显示新的IPO交易点燃了市场热情，尤其是在对私募股权公司友好的零售行业。一位知情人士透露，在童装生产商米格国际控股(Miko International Holdings Ltd.)本月进行的4,800万美元IPO中，针对散户投资者发行的股份获得了1,125倍的超额认购。