When bookbuilding launched on November 23 following a week-long investor education, it involved the sale of 1.32bn H-shares, which were marketed at HK$4.64-HK$5.54 a share. Some 90.9% of the stock was primary and the remaining offered by China’s National Council for Social Security Fund.
In the end, sole sponsor CCB International, which is also a joint global co-ordinator alongside Barclays, decided to price the IPO at HK$4.66 a share — just a couple of cents above the bottom of guidance.
This valuation was the most reasonable as it works out to about 1x P/B, according to a source close to the transaction. Chinese regulations ban state-owned companies from selling their shares at a discount to book value.
Its outcome was not entirely unexpected however when taking into consideration peer Bank of Qingdao, which priced its own HK$4.7bn listing at the lower side of the HK$4.75-HK$5.21 range at the end of last week, said a second source on Jinzhou’s trade.
Bank of Qingdao’s result was attributed to a market that was not easy to navigate, especially as the lender had to price its stock at a premium to most of its comparables. Jinzhou too faced challenges in convincing investors to buy a stock in primary when there were bargains to be had in secondary.
“The feedback from long-only investors was ‘Why buy stock at book value when we can buy some under that in the secondary market?’,” said the first source. “So it was more of a hedge fund play.”
The number of lines was not disclosed, but final allocations were slightly skewed to hedge funds. The retail portion meanwhile was not fully subscribed, with the shortfall taken up by institutions.
The leads had brought in just one cornerstone investor in advance, with Hong Kong Tian Yuan Manganese International Co pledging to buy 200m shares at the final offer price. But a handful of anchor orders was also in the bag before the IPO launched. This was because the accounts did not want their holdings to be locked up for six months as is typical for the cornerstones.
“But the absence of cornerstones didn’t hinder the pricing process,” added the source.
The two JGCs are also joint bookrunners together with ABC International, China Securities International and CMB International.
Jinzhou’s float has been long in the works. It first filed a draft prospectus in early April, but its loan exposure to the Hanergy Group, whose unit Hanergy Thin Film Power is under investigation by the Hong Kong securities regulator, came under scrutiny.
The bank then refiled an A1 to the Hong Kong Stock Exchange in October with revised numbers and more clarity on its loan books. It is set to be listed in the city on December 7.