China’s Welkin Capital puts IPO on hold

Welkin said in a filing that it was “greatly encouraged by the positive response” from the market to date but added that the decision to postpone was made in light of the feedback received. All funds committed will be returned to investors.

The firm had planned to list a unit called Welkin China Private Equity (WCPE) that was set to be the first closed-ended investment company on the London Stock Exchange (LSE) dedicated to investing in private Chinese companies.

While listings have been curtailed globally in the recent term, LSE has been experiencing a longer-term decline related to Brexit and regulatory challenges. It has tracked an approximately 40% decline in the annual number of IPOs across the past 13 years. Welkin chose the bourse over Hong Kong to be closer to European investors.

WCPE was envisioned as the manager of a diversified portfolio of private Chinese companies across various sectors that could leverage long-term trends while also exploiting short-term dislocations. The idea that China is shifting from a volume-fuelled expansion to productivity-led growth is core to the thesis.

There were said to be some USD 500m in pipeline investments with an initial focus on secondary opportunities and private equity funds managed by third parties. WCPE targeted an annualised net asset value return of at least 15%.

The decision to pause the IPO comes less than two months after confirmation of the plan, which would have effectively provided secondary exits at the LP and GP level. The seed assets in WCPE comprise interests in Welkin’s fund worth USD 15m and direct interests in 10 underlying portfolio companies worth USD 15m, to be exchanged for cash.

The seed assets include skincare supplier Shawya Biotechnology and automotive after-market services player Tuhu among others. Shawya has seen significant traction in the past year digitising a portfolio of brands targeting an increasingly sophisticated audience, while Tuhu has recently shifted its own IPO plans from the US to Hong Kong. Tuhu is reportedly seeking to raise USD 400m.

Welkin was established in 2009 by the scions of several prominent business-owning families in Greater China and has USD 500m in assets under management. Having initially made investments from its balance sheet, the firm closed a debut blind pool fund on USD 160m in 2017. It claimed a compound annualised return across all China-based investments of 28% as of December 2021.

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• Topics
• Greater China
• GPs
• IPO
• Secondaries
• China
• United Kingdom
• Welkin Capital