Newton Resources is expected to list in Hong Kong on July 4, after aborting a fund-raising plan last year amid a fraud scandal involving former shareholders of the mainland iron mining firm.
The company's earlier attempt at an initial public offering ended when its underwriters, Citi and Rothschild, became aware of an anonymous letter sent to the Hong Kong Exchanges and Clearing on May 6, just days before the launch of the IPO. The letter alleged that two persons surnamed Zhao in the firm's senior management were defendants in a complaint filed by the US Securities and Exchange Commission in a US court.
'The prior sponsors decided not to proceed with the prior offering,' according to Newton's current IPO prospectus. Zhao Haofu and Zhao Yinhe, two cousins who founded Newton in 2005, 'had not demonstrated to the satisfaction of the prior sponsors they were not Zhao Jun Tang and Zhao Yan Hong named in the SEC complaint'.
In its complaint, the SEC alleged a separate company, China Energy Savings Technology, was involved in stock manipulation to obtain a listing on Nasdaq fraudulently and inflate its stock price artificially. In 2008, a US court found Zhao Jun Tang and China Energy guilty of fraud.
In May last year, Rothschild introduced Zhao Haofu to NWS Holdings and a woman named Viola Mak Siu-hang, who bought Zhao's 51 per cent stake in Newton the following month.
The prospectus states: 'The [current] joint sponsors have undertaken due diligence to ensure that Zhao Haofu and Zhao Yinhe retain no interest in the company and are independent of the company.'
In the current IPO, Citi is the sole global co-ordinator while the joint sponsors are Citi, Macquarie and Rothschild. The book runners and lead managers are Citi, Macquarie, Bocom International and VMS Securities.