Luxury jeweller Graff Diamonds pulls Hong Kong IPO

Tumbling stock markets force Graff to pull its planned $1bn Hong Kong initial public offering

London luxury jeweller Graff Diamonds has pulled its planned $1bn (£645m) Hong Kong initial public offering, the fourth major IPO to be called off in Asia this week, as tumbling stock markets threaten to claim yet more casualties in the region.

Graff had been due to price its IPO on Friday, putting it on the verge of becoming Asia’s biggest completed flotation so far this year, but investors balked at the issue amid market-wide fears over the eurozone crisis and China’s economic slowdown.

“Consistently declining stock markets proved to be a significant barrier to executing the transaction at this time,” Graff said in a statement. Graff was due to list next week.

A slump in Asian equities in the past week has already derailed three major IPOs which were aiming to raise a collective amount of up to $1.37bn: two in Hong Kong and one in Singapore.

Deal volumes in Hong Kong, Asia’s IPO capital, have plunged 85% in the first five months of 2012 from a year earlier. Across the Asia-Pacific, overall volumes for share issues, including secondary offers, are down by about one-third.

The value of IPOs pulled in Asia ex-Japan has jumped to $7.7bn so far in 2012 from 46 planned offerings, up from $5.8bn, according to Thomson Reuters data. Hong Kong accounted for most of the scrapped deals.

Graff, which had planned to raise capital to help build a bigger Asian business centering on China, pulled its IPO as European and US markets tumbled more than 1% on Wednesday on fears over the eurozone.

Rival Tiffany & Co had added to the pressure, cutting its sales forecast last week and blaming slower demand from key markets such as China.

The market slump could also pressure IPOs now on the road, such as a deal worth up to $3bn by motor racing firm Formula One in Singapore. Despite expectations the deal will be priced next month, Formula One chairman Peter Brabeck said last week he had yet to give the final go-ahead.

“Appetite for new listings is pretty weak generally because of the macro situation,” said Eugene Mak, an analyst at brokerage Core Pacific Yamaichi in Hong Kong, adding the Graff IPO did not offer a lot of upside potential.

Graff’s Valuation

Graff Diamonds was founded in 1960 by Briton Laurence Graff. Born to Jewish immigrant parents in London, he has always kept control of the firm, attracting wealthy and celebrity clients such as the sultan of Brunei, Oprah Winfrey and Imelda Marcos.

Some analysts and fund managers had already begun questioning Graff’s valuation before Wednesday’s global market sell-off, citing a slowdown in luxury spending in China.

Hong Kong’s benchmark Hang Seng index has plunged 12% since 7 May, when Graff executives, its bankers and advisers began meeting institutional investors and fund managers to gauge demand for the offering.

Stocks in the luxury goods sector have been hit particularly hard, with Chow Tai Fook down about 23% over the same period and Tiffany falling 14%.

“We decided at the end of the day that it would be better to wait for a better time,” said a person involved in the Graff IPO.

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