ZIM’s IPO Completed Without Investor Excitement
Zim completed its much anticipated IPO but it failed to generate the anticipated investor interest for the container shipping line which had been hoping to leverage the current market demand into its stock. The offering was reduced in size and priced below its anticipated range on Wednesday and began trading down more than 20 percent on the New York Stock Exchange today.
The IPO was priced at $15 per share, which was below the anticipated range of $16-$19 per share, and the size of the offering was reduced to 14.5 million shares from the planned 17.5 million shares. Despite the revised terms of the IPO, Zim still achieved a market valuation of $1.75 billion, which was above the $1.5 billion long cited by analysts but below the $1.9 to $2.3 billion targeted by the underwriters.
Preliminary reports had said that Zim was hoping to raise between $300 and $500 million through the sale of the shares, which were offered entirely by the company with its existing holders agreeing to retain their positions. The IPO raised just over $217 million for Zim, which the company said could be used for investing in vessels, containers, and other digital initiatives, strengthening the capital structure, fostering financial flexibility, or possibly to service or repay certain outstanding debt.
When Zim filed for the IPO at the end of 2020, the prospectus laid out the investment case highlighting what they call their “asset-light model,” along with a flexible structure focused on niche routes and markets. By only owning one ship while chartering 69 vessels and focusing on mid-sized vessels with a capacity of 3,000 and 10,000 TEUs, Zim said it was a niche player. They cited greater flexibility to respond to market conditions versus the larger carriers and nice services such as their new premium high-speed services from China to Los Angeles and Australia focusing on time-sensitive cargo. Near-term they also cited strong growth opportunities for their Transpacific routes.
Despite beginning trading on a day that saw the major U.S. stock markets all rising, Zim’s shares opened at $11.50 per share. The stock briefly rose to just over $12.60 before settling in a range around the opening price of $11.50.
The lack of excitement for Zim’s IPO raises questions about the possible response by investors for some of the other IPOs planned for the maritime industry in 2021. Yesterday, Korea Shipbuilding & Offshore Engineering announced that it will move forward with a domestic IPO for its shipbuilding subsidiary Hyundai Heavy Industries. Several Asian shipping companies are also believed to be planning stock offers as well as companies in the energy and logistics sectors.