China Rare-Earths Firm Slumps 17% in Hong Kong Trading Debut

(Bloomberg) -- Shares of China’s JL MAG Rare-Earth Co. slumped 17% in their Hong Kong debut after being sold at the bottom of the marketed range in what is the biggest offering so far this year in the Asian financial hub.

The producer of magnetic rare-earth materials finished the session at HK$28.20. That’s versus an offer price of HK$33.80 apiece in the sale that raised HK$4.24 billion ($544 million). The Chinese company is already listed in Shenzhen, where it fell 1.4% on Friday.

JL MAG’s is the first offering to raise more than $500 million in Hong Kong this year as China’s crackdown on several private enterprises plus the prospect of rising interest rates cast a shadow over deals in the Asian financial hub. The slow 2022 start contrasts with a busy kickoff in 2021, when 16 companies priced nearly $8 billion worth of shares last January, Bloomberg data show.

LG MAG Rare-Earth posted the worst performance since Feb. 2018 for a Hong Kong listing bigger than $500 million. A-Living Smart City Services Co. declined 23% in its first session on Feb. 8, 2018. 

Shares of the 19 companies that debuted in Hong Kong over the past year after raising at least $500 million rose by an average 18% on the first day of trade, according to data compiled by Bloomberg. The average gain among those that debuted over the past six months, though, was just 4%.

LG MAG Rare-Earth has said that it aims to use proceeds of the share sale for construction of a production base in Ningbo, potential acquisitions through 2023 and expansion of a global industry-chain layout. Profit for the six months ending June 2021 was 220.6 million yuan ($35 million), a 141% jump over same period a year earlier, according to the company’s prospectus.   

Citic Securities Co. and BNP Paribas SA were joint sponsors of the Hong Kong deal.

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