GreenTree Gets Little Hospitality on First Day of Trading

The company, which originally planned to issue 19.4 million ADSs, cut that back on Monday and sold 10.2 million shares today.

Peter H. Frank
    Mar 27, 2018 1:43 PM  PT
GreenTree Gets Little Hospitality on First Day of Trading
author: Peter H. Frank   

Executives of GreenTree Hospitality Group Ltd. were beaming this morning when they rang the opening bell at the New York Stock Exchange, but the lights quickly dimmed for the Shanghai-based company after the stock began trading. 

It apparently wasn't enough that the company, a leading hotel franchisor in China, had already cut its offering price below its expected range (a day after nearly halving the number of shares it planned to offer), the stock sagged badly today after a short-lived pop. 

After being priced at $14 per share, below the $16 to $18 per share it had expected, shares in GreenTree (NYSE: GHG) opened at $14.40 and hit $14.70 within a few minutes. However, that didn't last long. GreenTree closed down more than 7 percent, or $1, to $13 per share. 

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The company, which originally planned to issue 19.4 million ADSs, cut that back on Monday and sold 10.2 million shares today. Primary book runners on the deal were Morgan Stanley, BofA Merrill Lynch, and UBS Investment Bank.  

It was a difficult start to a company that has seen its fortunes grow recently. It also raised some questions, at least temporarily, about the appetite in New York for Chinese companies as they pursue their own initial public offerings in the midst of a possible trade war between the U.S. and China. Bilibili Inc., OneSmart International Education Group Ltd., and iQiyi Inc. are each expected to launch an initial public offering in New York this week. 

Less than a week ago, Sunlands Online Education Group (NYSE: STG) suffered through a similar day after offering shares at $11.50, the low end of its pricing range, then soaring up, then down, and closing off 40 cents on the day. Sunlands closed today at $10.69 per share. 

GreenTree, which has nearly 2,300 hotels under franchise with an additional 300 hotels planned or under development, is the fourth-largest economy to mid-scale hotel group in China. GreenTree had $119.6 million in revenue in 2017, an increase of 20 percent compared with the year before, while earnings increased 7 percent to $43.8 million.

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