Chinese brokerage Guotai Junan to raise HK$16b in Hong Kong IPO

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Guotai Junan Securities chairman and executive director Yang Dehong said there was huge demand from investors. Photo: David Wong

Published: 10:01pm, 27 Mar 2017Updated: 10:47pm, 27 Mar 2017

China’s third biggest brokerage by assets, Guotai Junan Securities, plans to raise HK$16.04 billion in an initial public offering (IPO) in Hong Kong, the company said on Monday.

The company’s decision to offer 1.04 billion new shares at a fixed price of HK$15.84 per share came as a surprise to many as most IPO deals determine their final pricing based on actual demand, giving out indicative price ranges instead.

The subscription period for the offering starts at 9am Tuesday and ends at 12pm Friday. The company hopes to begin trading on April 11.

“We decided to offer shares at a fixed price mainly because of the huge demand we saw from investors during our road shows,” said Yang Dehong, chairman of Guotai Junan Securities.

“We believe this is quite lucrative pricing in the market,” he added. “We have full confidence in having a very successful IPO launch with this price.”

The pricing represents around a 25 per cent discount to the firm’s closing share price on the Shanghai stock exchange on Monday. Guotai Junan said it referred to the top five mainland brokers’ closing prices in Hong Kong as the basis for its IPO pricing.

From left; Guotai Junan Securities vice president Zhu Jian, chairman Yang Dehong and president Wang Song at the IPO press conference announcement in Hong Kong on Monday. Photo: David Wong

“The PE ratio of the pricing now represents an approximately 15 per cent discount to that of the top five mainland brokerages’ closing prices on the Hong Kong bourse last Friday,” said Yang. “We need the discount to satisfy the huge passion from investors.”