China’s regulator cites investment bank CICC for negligence in arranging Lenovo’s US$1.8 billion IPO on Star Market

CICC failed to completely and accurately evaluate Lenovo’s business nature as to whether it qualified for “scientific and technological innovation,” CSRC said

CICC mainly relied on documents provided by Lenovo, the regulator said.

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A Beijing branch of China International Capital Corp. (CICC) on July 5, 2016. Photo: Bloomberg

Published: 8:46pm, 30 Dec 2021

China’s securities regulator has taken the nation’s largest investment bank to task for underwriting the US$1.8 billion initial public offering (IPO) by Lenovo in Shanghai, in a move that sends another chilly gust through the capital markets.

China International Capital Corporation (CICC), often described as the “Goldman Sachs of China,” was negligent in arranging Lenovo’s IPO on the Star Market, which was withdrawn in October a week after it was filed.

The bank’s staff failed to follow the review procedures in verifying whether Lenovo’s business qualified for the scientific and technological innovation requirement of the market, according to a statement by the China Securities Regulatory Commission (CSRC), adding that it had summoned five CICC executives to discuss the matter.

It was not immediately clear if CICC faced a reprimand or penalty over the incident. Spokespeople of CICC and the CSRC were unavailable for comment in Beijing. CICC’s shares closed unchanged in Hong Kong, rising 1.2 per cent in Shanghai amid a rally among stockbrokers and investment banks.

Lenovo’s logo at the Lenovo Tech World in Beijing on November 15, 2019. Photo: Reuters

The IPO withdrawal by Lenovo, the world’s largest vendor of personal computers and owner of the IBM Thinkpad brand, was the second major stock sale to be foiled since Ant Group’s US$39.7 billion dual sale was pulled in November 2020. It underscored the push by regulators to redraw the qualifications for listing on the Star Market, which was established in 2019 at the behest of the Chinese president to help the nation’s technology champions raise capital.