The online news portal of the People's Daily, a Communist Party mouthpiece, has raised 1.38 billion yuan (HK$1.7 billion) in an initial share offering in Shanghai - more than double its target.
People.cn, the first state-run news website to list, sold 69.1 million shares at 20 yuan each, it told the Shanghai stock exchange on Thursday.
Earlier this week, it set the offering's price range at 20 to 22.5 yuan a share. Though the final price was at the bottom of the indicative range, the figure represents a price-earnings (PE) ratio of 46.1.
The average PE ratio of A-share stocks in Shanghai is 14.6, according to exchange data.
To be sure, investors' enthusiastic response to the listing is particularly impressive, given the sluggish market sentiment.
'Institutional investors are showing interest in the state-owned news portal because People.cn is the first of its kind,' said Qiao Mu, director of the International Communication Research Centre at Beijing Foreign Studies University. But the enthusiasm does not reflect the portal's real value, he says. The 13.8 million shares allotted for institutional investors in the offline bidding system were 56 times oversubscribed, while the remaining 55.3 million shares offered to the general public were 51 times oversubscribed.
'Investors will speculate in the short term, but in the long term the stock will return to its value,' said Qiao, who estimates that the shares are not worth more than 5 yuan each. 'People.cn is a highly risky investment. It has no competitive business model, no professional management and has a small market share.'
Kenny Tang Sing-hing, general manager of AMTD Financial Planning, said the offer price was driven more by speculation than economic fundamentals. 'Internet stocks are easy to cook as there is no fair PE to refer to in the industry,' he said.
The move to set the final price at the bottom end of the price range indicates the listing issuer was being pressured by the China Securities Regulatory Commission (CSRC), which has been urging firms to set reasonable prices for new shares to protect investors' interests.
'The CSRC's stance is that IPO prices should not be set too high as experience shows they are unsustainable and decline after listing,' said Tang. 'The price range of People.cn was already high, so it was forced to set the final price at the bottom of the range.'
The mainland is the world's largest internet market in terms of the number of users, which topped 1 billion in February, according to official statistics.
Xinhuanet, Xinhua's online portal, may be next to list.
It reportedly plans to raise 1 billion yuan through a share offering in Shanghai.