Guilin Sanjin share sale attracts strong demand
Daniel Ren in Shanghai
The first initial public offering on the mainland after a nine-month suspension has drawn heavy subscriptions as retail investors bet the stock will benefit from a buying euphoria when it starts trading on the Shenzhen Stock Exchange.
The 36.8 million shares offered to the general public, or 20 per cent of the total offering, by Guilin Sanjin Pharmaceutical yesterday were still heavily oversubscribed even though the flotation price was much higher than expected, according to an official with China Merchants Securities, the underwriter of the offering.
It was not known how much upfront payment was tied up to the offer yesterday. Guilin Sanjin plans to float 46 million shares to raise 630 million yuan (HK$714.48 million).
It set the offer price at 19.80 yuan each last week and would raise 44 per cent more than originally targeted.
The 920 million shares allocated to institutional investors in an offline bidding system were 165 times oversubscribed, it said. Under new rules, institutional investors are barred from taking part in both online and offline biddings.
This is aimed at giving retail investors a bigger opportunity to win lucrative new shares.
The China Securities Regulatory Commission said yesterday that it stepped aside from pricing Sanjin's offer, letting market forces decide.
Previously, the CSRC had the final say in the pricing as most flotation shares were set artificially low to facilitate companies' fund-raising.
Despite the high price, retail investors still flocked to the deal, believing the shares would continue to surge after listing, brokerage sources said. Analysts expected the shares to trade at about 20 yuan, based on the fundamentals of Guilin Sanjin.
But they would not rule out a big rise after listing since inexperienced investors might rush to snap up the stock.
Meanwhile, Your-Mart said it had received the go-ahead to launch a share sale on the Shenzhen exchange, the third firm to offer new shares after the suspension.