Foxconn unit gets green light to start fundraising for US$4.3 billion IPO, China’s biggest in three years

Subsidiary of world’s biggest contract manufacturer whose products include Apple’s iPhones, will invest funds in cloud computing, 5G technology

PUBLISHED : Monday, 14 May, 2018, 2:12pm
UPDATED : Monday, 14 May, 2018, 10:10pm

Foxconn Industrial Internet, a unit of the world’s biggest contract manufacturer whose products include Apple’s iPhones, edged closer to an initial public offering of 27 billion yuan (US$4.27 billion) after Chinese regulators gave it the green light to start fundraising.

It is expected to be the largest IPO on the mainland for three years and comes as Beijing steps up efforts to encourage listings of technology firms on the domestic stock exchanges.

The company, controlled by Taiwanese billionaire Terry Gou, confirmed in a filing on Monday morning that it will target total proceeds of 27 billion yuan, in line with the amount it published in its IPO prospectus.

The China Securities Regulatory Commission said at the weekend that the listing date for Foxconn will be fixed by the Shanghai Stock Exchange after it consults with the underwriters.

The announcement ended speculation that the regulator was hesitant to approve the IPO due to worries about a market downturn. There had also been speculation that Foxconn might scale down the IPO because of weakness in the market.

Foxconn aims to raise 27 billion yuan by floating 1.8 billion shares, or 10 per cent of its capital, on the Shanghai exchange. It will use the proceeds to fund eight new projects including cloud computing, building a data centre, 5G mobile network technology, “internet of things” projects and expansion into so-called intelligent manufacturing, according to its stock sale prospectus.

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The fundraising will be the biggest on the A-share market – mainland Chinese companies whose shares are traded in yuan on the domestic exchanges – since June 2015 when Guotai Junan Securities raised 30 billion yuan via an IPO.

Foxconn passed through a review procedure by the CSRC in early March, just five weeks after it filed the IPO application. But it still required approval to begin book-building – the process of gauging demand in order to price the IPO.

The benchmark Shanghai Composite Index gained 0.55 per cent to 3,180.8 in the morning session on Monday.

“The market has been prepared to digest big technology IPOs,” said He Yan, a fund manager with Shanghai Shiva Investment. “The company will attract a large sum of capital during IPO subscription.”

The speedy clearance of Foxconn’s application underscores the priority that Beijing is giving to technology companies as it competes with Hong Kong as Asia’s hub for fundraising.

Normally an IPO applicant needs to wait for about two years before it is allowed to raise capital on the Shanghai and Shenzhen stock exchanges.

Beijing fast tracks foreign-listed Chinese tech firms’ A-share flotation with CDR system launch

The CSRC also drafted new rules to fast-track the Chinese Depository Receipt (CDR) system recently to facilitate fundraising on mainland markets by technology firms funded by overseas capital.