Ninebot’s depositary receipts, China’s version of ADRs, double on Shanghai’s Star Market debut
- Chinese depositary receipts of smart scooter maker Ninebot surge in early trading on Shanghai’s Star Market board for technology companies
- Ninebot, partly-owned by Xiaomi, has not made any profit before its US$198 million offering
Ninebot’s Chinese depositary receipts (CDRs) surged 103 per cent to 38.5 yuan on the Star Market at the closing of trading on Thursday. About 1.6 billion yuan (US$238.6 million) worth of the securities changed hands. There is no limit on how much prices can rise or fall on the exchange’s technology board, compared with a 44 per cent cap for the upside on its main board.
China allowed the Ninebot, a smart-scooter maker and owner of Segway, to issue the first-ever CDRs in September, a culmination of years of efforts to broaden the onshore capital market along the liberalisation, or gaige kaifang , initiated by the late paramount leader Deng Xiaoping in 1978.
“Ninebot has an edge over products and channels and its sales are expected to grow fast soon,” said Dong Ruibin, an analyst at China Merchants Securities. “Smart tools for short-distance transport dovetail with China’s policy on energy saving and emission reduction.”
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The feat is a precursor to yet another historic milestone as Ant Group, owner of China’s largest online-payment system Alipay, unveiled the world’s biggest-ever stock offering on the way to its debut on the Star Market and Hong Kong on November 5.
Ant Group will begin taking orders from retail investors for the Shanghai leg of its mega offering from Thursday.
Beijing-based Ninebot, raised 1.33 billion yuan from selling 70.4 million CDRs at 18.94 yuan apiece. The offering attracted about 2,500 times more orders than the amount available to investors. Each CDR represents one-tenth of the company’s ordinary shares.
CDRs allow foreign-incorporated Chinese companies to raise funds from the onshore market. Such businesses typically control their mainland operation through variable interest entities or VIEs. Ninebot is registered in offshore haven Caymans Island. The programme was recently extended to the ChiNext board on the Shenzhen Stock Exchange.
The CDRs are akin to American depositary receipts (ADRs), which enable the likes of Alibaba Group, JD.com and other Chinese companies to raise money extensively from the US capital market. Alibaba is the owner of this newspaper.
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Ninebot is partly-owned by smartphone maker Xiaomi Corp. It plans to use the money to fund an electric-car project, build a research centre and replenish its working capital.
The scooter maker has not made money in each of the past three years through 2019. Its annual loss was 454.8 million yuan last year. The company may have posted a loss of as much as 75 million yuan in the first nine months this year, according to its prospectus.
Additional reporting by Yujing Liu