The initial public offering of Anhui Saunaking was more than 300 times oversubscribed as the sauna equipment company launched its listing on the mainland's ChiNext market, normally a venue for technology stocks.
But analysts doubted whether the strong buying interest would open a floodgate for more non-hi-tech firms to seek fundraising activities on the second board.
Saunaking's 16.4 million shares slated for the public investors drew subscriptions of 83 billion yuan (HK$100 billion), and its 4.08 million shares earmarked for institutions attracted upfront payment of 1.3 billion yuan, according to the company's filing to the Shenzhen Stock Exchange.
The successful share floatation on the ChiNext market, known as China's Nasdaq, helped Saunaking raise 328 million yuan to help fund its expansion. The company offered the IPO shares at 16 yuan a piece, or 29.6 times its 2010 earnings.
'A domestic brand of sauna equipment won't be widely accepted by consumers unless it spends a large amount of funds to enhance design capabilities and expand its sales network,' Saunaking chief executive Jin Daoming said last Friday.
Saunaking's IPO application was rejected by the China Securities Regulatory Commission in a hearing on November 22, 2009. It received a go-ahead to launch the IPO on June 9 after passing through the review.
'It is neither a hi-tech nor an innovative company,' Essence Securities analyst Liu Jun said. 'If more companies of this type are listed on the growth market, it will taint its reputation.'
Beijing launched the ChiNext market in October 2009, giving start-up and promising firms a much-needed platform to raise growth funds. Hundreds of hi-tech companies with huge growth potential are awaiting a nod from the regulator to float shares on the ChiNext.
The regulator was not available for comment yesterday.
Saunaking's IPO was the second in less than three months to spark controversy on the mainland.
In early May, Shanghai Yaoji Playing Card, a maker of playing cards used for poker, blackjack, bridge and other games, was approved to sell 23.5 million shares on the SME board at the Shenzhen exchange to raise about 363 million yuan.
Playing cards are often used for gambling and Yaoji's IPO would probably be interpreted as a message that the government would loosen its control on gambling, which is illegal on the mainland, analysts said.
The regulator did not immediately allow Yaoji to start price consultations despite approving its IPO.
On the mainland, companies that received IPO approvals cannot kick off the offering process until they get another green light from the China Securities Regulatory Commission.
It was not until recently that Yaoji was allowed to start price consultations scheduled for July 26.
The mainland's IPO market was the world's largest last year when 349 companies raised a record 478.3 billion yuan on the Shanghai and Shenzhen exchanges.
In the first half of his year, 168 IPOs were launched on the mainland, raising a total of 176.3 billion yuan.