Why WE Soda’s Oversized Syndicate Makes Sense
WE Soda, owned by Turgay Ciner and family, recently announced their IPO with at least 10% of the company’s stake being sold to raise approximately $800 million. Amidst all the buzz, one detail that caught the attention of market enthusiasts was the inclusion of eight bookrunners – three joint global coordinators and joint bookrunners and five joint bookrunners – in the syndicate. While many deemed it unnecessary, some industry experts pointed out why this particular move would make sense for WE Soda’s IPO in London.
Exploring the Importance of Bookrunners
Bookrunners have a significant presence in the IPO process. They are responsible for organizing the IPO and coordinating its different aspects, such as valuation, pricing, and drafting the prospectus. It’s their job to create a message that will resonate with investors and attract attention to the IPO at hand.
Three Reasons Why WE Soda’s Syndicate Makes Sense
1. Maximizing Global Coverage
WE Soda’s oversized syndicate ensures maximum coverage in the global market once the search blackout lifts. The number of bookrunners may be due to Boutique names being added to the list or an opportunity to access new markets.
MUFG Securities EMEA plc (“MUFG”), for instance, is one such name that has made a rare appearance on a UK ticket. MUFG is one of the world’s leading financial groups and has a little-known Turkish franchise, which could explain their involvement with WE Soda.
2. Broadening Access to Retail Investors
While retail investors are often overlooked during IPOs, PrimaryBid has been added as part of the syndicate. PrimaryBid provides private investors with equal access to the shares offered by the same bookrunners.
3. Making a Strong Impression
Including eight bookrunners proves that WE Soda wants to create a strong first impression.
Describing WE Soda’s Business Model
WE Soda is a big player in the natural soda ash business, a material used in the production of products such as glass, detergents and paper. Though it is a relatively simple product, the high demand and low supply make the commodity precious.
WE Soda’s natural endowments, coupled with the company’s technological advancements, allow for lower production costs, subsequently, margin expansion.
Bottom line, WE Soda is the market leader and has a stable, albeit traditional, business model. The company has a deeply entrenched position in the industry with long-standing supply contracts, making it less exposed to price volatility.
The Turkish Lira’s Depreciation
The same day WE Soda announced its intention to float, the Turkish lira hit an all-time low compared to the dollar, which drew attention to the difficulty of investing in Turkey’s local market. In addition, London’s reputation as an EM safe house became a topic of discussion.
Turkey’s political uncertainty, recurring financial crises and market volatility made it hard for investors to perceive the Turkish market as lucrative. London, in comparison, is a familiar territory, and one of the world’s top financial hotspots, making investors more comfortable with investing.
Liberum’s Take on WE Soda’s IPO
Liberum, one of the joint bookrunners that handled WE Soda’s IPO, looks favorably on the company’s prospects. They consider WE Soda’s fundamentals to be attractive and, by extension, the company’s IPO to be well-timed.
Liberum points out that despite the volatile Covid-19-induced business environment, the soda ash industry is relatively stable due to factors such as having end-products with noncyclical demand.
The majority of the $800m raised from the listing will be used to settle the parent company’s debt to its affiliates, reducing the interest handled by WE Soda company to its affiliates.
What Lies Ahead
WE Soda’s listing proved popular and was oversubscribed. It received ten times the demand, which was a massive success. Its share price rose over 30% when it debuted on the London Stock Exchange. It was a piece of excellent news for primary shareholders, with Mr. Ciner’s stake estimated to be worth £300m.
WE Soda’s IPO has shown how a relatively unknown yet stable commodity listed in the right market can still generate high demand. In the long run, its business model, low costs, and secure contracts make it an attractive and stable investment option.
Summary
WE Soda’s recent decision to include an oversubscribed syndicate of eight bookrunners surprised many investors. However, WE Soda’s business fundamentals, coupled with the need to maximize global coverage and leverage the benefits of bookrunners, makes it a sound decision. Additionally, WE Soda’s IPO has shown that traditional and stable commodities, such as natural soda ash, can still generate high demand if listed in the right market at the right time.
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Eight, apparently:
[WE Soda] has engaged JP Morgan Securities plc (which carries on its UK investment banking business as JP Morgan Cazenove) (“JP Morgan”) as Sole Sponsor, Joint Global Coordinator and Joint Bookrunner, BNP PARIBAS (“BNPP”) and Goldman Sachs International (“Goldman Sachs”) as Joint Global Coordinators and Joint Bookrunners, and, Deutsche Bank AG, London Branch (“Deutsche Bank”), Liberum Capital Limited (“Liberum”), Morgan Stanley & Co. International plc ( “Morgan Stanley”), MUFG Securities EMEA plc (“MUFG”) and Numis Securities Limited (“Numis”) as Joint Bookrunners of the Offer.
US Soda intention to float RNS confirms that Turgay Ciner and family are selling at least a 10% stake in the producer of natural soda ash (it’s used in glass making and stuff like that). Ciner — whose empire includes the pro-government Habertürk media group and a stake in Turkish-language Bloomberg HT, as well as a handsome home in the London Borough of Holland Park – expects to raise approximately $800 million, of which $500 million will go to settle intragroup debt.
WE Soda’s announcement fell on the same day as the Turkish lira has hit an all-time low compared to the dollar it is a coincidence that underlines both the non-investability of the local market and of London attractions such as an EM safe house.
Still. It was once consent that WE Soda-sized float only needed two or three bookrunners. An oversized syndicate (plus PrimaryBid for retail) will ensure plenty of coverage once the search blackout lifts, which could explain some of the boutique names on the list, while MUFG’s rare appearance on a UK ticket can perhaps be explained by his Turkish franchise.
Eight, Although? For a ~$800 million placement? What will they do all day? Replies invited in the comment box.
Further reading:
WE Soda arrives in London. Why? (FTAV)
Information sheet provided by the company (PDF)
https://www.ft.com/content/1bea38c0-3b1a-441b-8631-f186a54f5674
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