Shaanxi Coal halves fundraising target as regulator tightens scrutiny of IPOs

PUBLISHED : Thursday, 16 January, 2014, 2:56pm
UPDATED : Thursday, 16 January, 2014, 2:56pm

Shaanxi Coal Industry has slashed the target for its initial public offering by half, seeking to raise up to US$660 million, amid regulatory pressure on listing companies to ensure that the resumption of IPOs in China is not marred by unrealistic valuations.

The China Securities Regulatory Commission said late on Wednesday that it had begun inspections of IPO pricing behaviour, targeting 13 underwriters and 44 institutional investors.

That follows an announcement by the commission on Sunday that it would step up supervision of IPOs. Since then, companies have been selling shares at a discount despite firm demand.

The Shaanxi Coal IPO will still be the biggest mainland listing since 2012 and comes after the securities regulator resumed public listings after a hiatus of more than a year.

Shaanxi Coal, which will list in Shanghai, aims to sell up to 1 billion shares at 4 yuan (HK$5.09) apiece, the company said in a statement, meaning it would raise 4 billion yuan if it is fully subscribed.

The company said this month it was hoping to use its IPO proceeds to fund 9.8 billion yuan of projects. Before the IPO market was frozen in late October 2012, Shaanxi Coal had filed a plan to raise 17.2 billion yuan.

Investors will get the first-hand look of appetite for new shares in the secondary market when Neway Valve (Suzhou), a major industrial valve maker, debuts on the Shanghai stock exchange on Friday.

The company raised 1.46 billion yuan after selling 82.5 million shares at 17.66 yuan apiece, equivalent to 46.47 times its 2012 profit – more than double the average price to earnings ratio of 21.25 for manufacturers listed on the Shanghai exchange.

Shaanxi Coal’s IPO was valued at a price to earnings ratio of 6.23 times its 2012 profit on a diluted basis, compared with an average of 10.31 times for mining firms listed on the Shanghai stock exchange.

The company will announce the results of subscriptions on Monday.

China Securities, CICC and BOC International are the underwriters for the IPO.