At 9:30 local time on October 27, 2016, China’s ZTO Express debuted at the U.S. New York Stock Exchange. [Photo/China.org.cn]

At 9:30 local time on October 27, 2016, China’s ZTO Express debuted at the U.S. New York Stock Exchange, with the Chinese flag and the ZTO Express flag of white letters on a blue background both flying outside. ZTO Express priced the 72.1 million shares issued at $19.50 a share and opened at $18.40 a share. ZTO Express has Sequoia Capital China, Warburg Pincus, Hillhouse Capital Group, and Standard Chartered Private Equity as institutional investors and Morgan Stanley, Goldman Sachs, Citigroup, China Renaissance Partners, Credit Suisse, and JPMorgan Chase as underwriters for its IPO.

ZTO priced the 72.1 million shares at $19.50 a share, above its previously indicated range of $16.50 to $18.50 a share. ZTO Express’ American Depository Shares (ADS) can be calculated at a conversion ratio of one share for one share against the company’s Class A common shares. The stock market debut was the biggest by a Chinese company since the $25 billion IPO of e-commerce giant Alibaba in 2014. This IPO will help the company obtain the cash it needs for expansion and greater market opportunities in the world’s largest express delivery market. The company will use $720 million of its IPO proceeds to buy more trucks, land, facilities, and equipment.

According to people familiar with the company’s financials the offering price is about 27 times its expected earnings per share (EPS) in 2017. By comparison, SF Express, YTO Express, STO Express and Yunda shares are traded between 43 and 106 times their respective EPS, according to Haitong Securities estimates. For investors, the shares of the Chinese company on the U.S. stock market are much cheaper. United Parcel Service and FedEx, which grow much slower than ZTO Express, are trading their shares between 17.8 and 13.4 times their expected EPS in 2017. Morgan Stanley and Goldman Sachs Group are the lead IPO underwriters. Its Chinese competitors, SF Express, YTO Express, STO Express and Yunda Express, have all announced their plans for going public in Shenzhen or Shanghai. However, there are about 800 companies waiting for approval to go public in China and these companies have to face frequent changes to the listing rules. Therefore, choosing the U.S. as the place for going public is regarded as a quicker and more reliable way of raising funds in U.S. dollars which show a trend for appreciation. This can also attract the broadest group of investors around the world.

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