Wanda's IPO rollercoaster

The company has missed not one, not two, but three deadlines to list shares of its management unit in Hong Kong.

Wanda's IPO rollercoaster
Wang Jianlin - Annual Meeting of the New Champions Dalian 2009. Source: World Economic Forum.

The backstory: Wang Jianlin is a Chinese billionaire who founded the conglomerate Dalian Wanda Group, commonly known as Wanda, back in 1988. Wanda is into all sorts of stuff like real estate, entertainment, hotels and shopping malls. One of its subsidiaries, Zhuhai Wanda Commercial Management Group, focuses on managing shopping malls and commercial properties.

Now, Wanda is known for making some big moves in the entertainment industry. It bought AMC Entertainment, which is one of the biggest cinema chains in the US, making it the largest cinema chain operator in the world. It also owns Legendary Entertainment, the guys behind movies like "Jurassic World" and "Dune."

But Wang's got even bigger plans. He wants to turn his company into the Chinese version of Walt Disney, with entertainment, hotels and all that jazz. He even wanted to take his management arm public through an initial public offering (IPO) in Hong Kong. But things haven't gone as smoothly as he had hoped.

More recently: The company has missed not one, not two, but three deadlines to list shares of its management unit in Hong Kong. March was a huddle for the firm when Chinese regulators decided to dig deeper into Wanda's business. They sent a letter to Wanda's mall unit, asking why the share sale was delayed. Last week, a Shanghai court even froze shares worth 1.98 billion yuan (US$278.18 million) held by one of Wanda's commercial property management units over some financial disputes with its partner in a project in Changchun.

The development: Last year, the mastermind behind Wanda, Wang, seemed pretty confident in his status, as he reportedly offered financial assistance to a fellow Chinese mogul who wanted to sell a portfolio of shopping malls for a cool 700 million yuan (US$98 million). Wang's grand plan was to scoop up those malls and add them to Zhuhai Wanda in in preparation for the IPO. But he’s faced some financial challenges in the past few years, with his US$40 billion (at its peak) withering down to US$6.6 billion.

Now, according to some insiders, he’s been busy talking to regulators and strategic investors, trying to get support for his company. Meanwhile, his top guns are running all over the country, trying to strike deals with banks, trust firms and suppliers to give it more time to pay back the billions of dollars it owes.

The company still has around 40 billion yuan (about US$5.6 billion) in cold, hard cash at the group level. But things could get dicey if its Zhuhai Wanda unit fails to go public this year, which could see it struggle to pay back its investors.

Key comments:

“For the last 10 years, the property companies expanded too fast with too much debt,” said Louis Tse, managing director at brokerage firm Wealthy Securities. “The good old days are gone for good, especially for Chinese property billionaires.”

“When and whether Zhuhai Wanda would obtain IPO approval is now more uncertain,” said S&P Global Ratings analysts Iris Cheng and Esther Liu in a June 5 report that downgraded Wanda Commercial to a BB rating. “Dalian Wanda Group’s financing channels could further narrow if no positive feedback is received” on the listing.

“The troubled company still faces an untenable future without significant changes to both its business model and balance sheet,” said Brock Silvers, managing director at private equity firm Kaiyuan Capital. “Investors have no reason to think those changes are imminent.”

"We see heightened risks from Dalian Wanda Group's narrowing financing channels due to extended delay in Zhuhai Wanda's IPO. Weaker property sales than we expected for Wanda Properties Group Co Ltd, a sister company of Wanda Commercial, have worsened the situation for the group," said  S&P Global, the rating agency, when it made a downgrade rating on Dalian Wanda from 'BB+' to 'BB' last week.