The Largest IPO of 2016, ZTO Express, Plunges in Debut

You can thank the leader underwriters for this disaster. Guess who? Goldman Sachs and Morgan Stanley. Who else could it be, really?

This is a courier provider in China, based like an American Greed company in the Cayman’s. Upwards of 77% of their business derives from Alibaba.

Pray tell me, what happens to ZTO should BABA ever decide to buy start its own courier service?

KABOOM.

The stock market debut, the biggest by a Chinese company since the $25 billion IPO of e-commerce giant Alibaba in 2014, gave the Shanghai-based company a market value of more than $12 billion.

ZTO priced 72.1 million shares at $19.50 a share, above its previously indicated range of $16.50 to $18.50 a share. That price is about 27 times its expected 2017 earnings per share, according to people familiar with the company’s financials. The company wants to use $720 million of its IPO proceeds to buy more trucks, land, facilities and equipment.

FDX trades at 24x earnings and UPS 19x. Obviously, Wall Street doesn’t think ZTO deserves to trade at a premium to those two companies.