Foxconn unit’s US$4.27 billion IPO sparks Chinese buying frenzy

Foxconn Industrial Internet’s shares allocated to the public online were almost 300 times oversubscribed ahead of China’s biggest IPO for three years

PUBLISHED : Friday, 25 May, 2018, 9:31am
UPDATED : Friday, 25 May, 2018, 11:42pm

Foxconn Industrial Internet sparked a buying frenzy for its IPO shares among mainland Chinese investors, buoyed by expectations that its price will surge after listing.

The subsidiary of the world’s biggest contract electronics manufacturer, Hon Hai Precision Industry, whose products include Apple’s iPhones, priced its 1.8 billion IPO shares at 13.77 yuan (US$2.16) apiece, slightly below the 14.04 yuan predicted by the market. That puts it on course to net 27.1 billion yuan (US$4.27 billion) in the mainland’s biggest new listing in three years.

Its 1.06 billion shares allocated to public investors via online subscription were 294 times oversubscribed, the company said in a statement on Thursday night.

The remaining IPO shares were earmarked for institutional and corporate investors.

“Technology stocks are the darlings of Chinese investors, and Foxconn will see its share price jump after trading debut,” said Ivan Li, an asset manager with hedge fund Loyal Wealth Management. “It remains to be seen whether it will become the largest A-share tech company in terms of capitalisation.”

As of Thursday, Wuxi AppTec, a leading mainland biotechnology firm, had soared to its daily trading limit for 13 consecutive days since debuting on May 8, chalking up a gain of 352 per cent.

Foxconn’s IPO, set to be the largest on the A-share market since Guotai Junan Securities’ 30 billion yuan offering in June 2015, would give the company a total market value of 271.2 billion yuan.

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It would trail only Shenzhen-listed Hangzhou Hikvision Digital Technology as the second-largest tech company by market value on the mainland stock exchanges.

Hikvision, China’s biggest supplier of digital video surveillance products, was valued at 368.3 billion yuan based on its closing price on Thursday.

The Shanghai Stock Exchange will set the date for Foxconn’s listing debut.

The offering price of 13.77 yuan translates into a price-to-earnings ratio of 17.1, well below the average multiple of about 40 among its existing A-share counterparts.

A consensus forecast among analysts is that Foxconn will top 30 yuan after trading begins. If that were to happen, the company’s total market capitalisation would top 540 billion yuan, about 50 per cent higher than Hikvision.

It said it will use the proceeds to finance 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 prospectus.

Beijing has accelerated IPO approvals for technology companies, including those funded by foreign capital, as a way of bolstering the country’s technological innovations.

Foxconn passed through an IPO review procedure by the China Securities Regulatory Commission in March, just five weeks after it filed an application.

Normally, an IPO applicant has to spend at least one and a half years to secure the go-ahead from the regulator.