China Mobile set to raise US$8.78 billion in Shanghai IPO to complete world’s second-biggest stock offering

China Mobile is planning what could be the world’s second-largest initial public offering (IPO) this year, almost a year after delisting from the New York Stock Exchange.

The world’s largest mobile network operator by subscribers will sell between 845.7 million and 972.6 million shares, inclusive of an over-allotment option to meet strong investor demand, at 57.58 yuan each in Shanghai, according to an exchange filing. The proceeds of 56 billion yuan (US$8.78 billion) would also rank as the second-largest IPO globally in 2021.

The offer price represents a premium of about 52 per cent over China Mobile’s Hong Kong-listed stock based on its closing price of HK$46.45 on Friday. The stock will trade under the 600941 code in Shanghai.

CICC and Citic are the joint sponsors of China Mobile’s stock offering.

Many Chinese companies seeking secondary listings at home have priced their stocks at significant premium to their Hong Kong-listed shares, a pre-existing condition primarily due to the divergence of a stock’s “fair value” as perceived by the two different investor bases in Hong Kong and the mainland.

The 14 Chinese onshore IPOs since 2020 involving companies with Hong Kong listings were priced at an average premium of 189 per cent, according to a report published by SWS Research. China Telecom priced its A shares at 4.53 yuan each in August, or almost twice its equivalent Hong Kong shares.

China Mobile is the world’s biggest telecommunications operator, with 946 million customers and broadband connections in 205 million households in 2020, according to SWS Research. That gave it an 11.6 per cent and 17.8 per cent share of China’s domestic mobile phone and data connection markets respectively.

“The key risk facing China Mobile is intensified competition, and the business model for its 5G telecoms services still not reaching maturity,” Lin Jin, an analyst at the brokerage said in a report this month.

Rivian Automotive, which raised US$13.7 billion on Nasdaq, was the world’sbiggest IPO globally this year, according to Refinitiv. China Telecom (US$8.3 billion) and Chinese short video-platform operator Kuaishou Technology (US$6.2 billion) completed the top three ranking.

All three of China’s leading carriers, whose American depositary receipts were delisted by the New York Stock Exchange earlier this year, will now have a home listing. China Unicom was earlier listed in Shanghai in 2002. The carriers were blacklisted by the US Defence Department for their alleged ties with the Chinese military.

These multibillion Chinese telco fundraisings is likely to lift the Shanghai Stock Exchange above Hong Kong among the busiest IPO venues worldwide, according to a report published by EY. The bourse is expected to host 254 IPOs with US$58 billion of proceeds by December 31, ahead of the US$41.5 billion estimate from 94 IPOs in Hong Kong.