Lenovo’s China IPO withdrawal leaves investors fuming as they blame founder Liu Chuanzhi for woes

Lenovo Group planned to raise US$1.6 billion from sale of Chinese depositary receipts, but withdrew its application

The IPO would have helped the Chinese personal-computer giant to lower its debt ratio that stood at 90.5 per cent at the end of last year

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China’s Lenovo Group makes one in four personal computers sold worldwide. Photo: Reuters

Published: 8:30am, 12 Oct 2021Updated: 10:21pm, 12 Oct 2021

The surprise withdrawal of Lenovo Group’s Shanghai IPO has divided opinion among investors, with analysts saying the move only harms the Chinese personal-computer giant’s deleveraging prospects.

Traders in Hong Kong fretted over a 13 per cent slide in Lenovo’s shares – its biggest drop in three years – on Monday, as the sale of Chinese depositary receipts (CDRs) on the Nasdaq-style Star Market would have helped the company raise 10 billion yuan (US$1.6 billion). However, comments from Chinese investors online and reports in the mainland media showed they supported the withdrawal.

The world’s biggest maker of personal computers has been criticised by local investors for a number of reasons, including its low profit margin, small outlay on research and development and lack of hi-tech business segments. The massive salaries paid to senior executives and its retired founder Liu Chuanzhi, which have partly blamed for eroding Lenovo’s competitiveness, have also left investors fuming.

Lenovo founder Liu Chuanzhi pictured in June 2015. Photo: SCMP

Lenovo’s decision to scrap the initial public offering came just eight days after the Shanghai Stock Exchange accepted its application. The Beijing-based company said in a statement to the Hong Kong exchange that the validity of the information on the prospectus may have lapsed during the vetting period. The withdrawal has deprived it of an opportunity to lower the debt ratio that stood at 90.5 per cent at the end of last year, a level that is even higher than the nation’s biggest property developers such as China Vanke and Country Garden Holdings, analysts said.

“Lenovo’s decision may disappoint bondholders hoping for an unlikely near-term ratings upgrade as its deleveraging pace could now slow,” said Cecilia Chan, an analyst at Bloomberg Intelligence.