China IPO Breaks New Ground Pricing Shares at 468 Times Profit
China IPO Breaks New Ground Pricing Shares at 468 Times Profit
(Bloomberg) -- Intense Chinese demand for initial public offerings on the country’s new stock board is sending valuations for new listings sky-high.
A biotech firm priced its shares at about 468 times reported earnings, according to a Shanghai exchange filing. That’s almost triple the most expensive of last week’s inaugural batch of debuts. Shenzhen Chipscreen Biosciences Co., which was founded in 2001 and focuses on cancer treatments, plans to raise about 1 billion yuan ($145 million) from the offering, about 27% more than its initial target.
In a bid to attract high-growth technology firms to list on domestic exchanges, China’s regulators this year removed an unwritten cap on valuations for companies debuting on Shanghai’s new Star market. Advanced Micro-Fabrication Equipment Inc. was the priciest initial public offering among the venue’s first batch of 25 stocks -- which started trading last week -- and has almost tripled in value since listing at 171 times profit.
“The limited supply for the second batch of listings and the overwhelming performance of the first batch have fueled investor enthusiasm,” said Jiang Liangqing, a money manager at Ruisen Capital Management in Beijing.
More than 120 companies have joined the queue to list on the tech board. The market, the only venue in the country where stocks can move freely on the first day of trading, opened to much fanfare last week with all stocks rallying. The market rose an average 2.1% Tuesday, according to an index compiled by Bloomberg and weighted by market value.
China has imposed a regulatory cap of 23 times earnings for all IPOs since 2014, with some exclusions for state-backed firms. While the aim was to protect retail investors from buying into shares at inflated prices, the practice has meant entrepreneurs preferred to take their companies public in New York or Hong Kong, where they could raise more funds.
Shenzhen Chipscreen said its listed peers trade at an average 31 times reported earnings, according to the filing that cites one-month data.
To contact Bloomberg News staff for this story: Ken Wang in Beijing at ywang1690@bloomberg.net
To contact the editors responsible for this story: Sofia Horta e Costa at shortaecosta@bloomberg.net, David Watkins
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With assistance from Bloomberg