China Galaxy Securities is to go ahead with an A-share listing in Shanghai, less than a year after it raised HK$8.31 billion ($1.1 billion) through an initial public offering in Hong Kong.
The company, which is majority-owned by one of China's sovereign wealth funds, had initially planned a concurrent dual-tranche listing in mainland China and Hong Kong. However, with the A-share market shut from October 2011 to January 2014, the securities house chose to go for a Hong Kong listing first.
China Galaxy Securities said Saturday it will now revive plans to list in Shanghai as well.
The company will issue up to 1.7 billion shares or 18.35% of its total share capital. Based on Monday's H-share closing price of HK$4.88, that means it could raise up to Rmb6.58 billion ($1.1 billion).
Citic Securities, Guotai Junan Securities and Ping’An Securities are helping on the deal, according to market sources.
Galaxy Securities needs to amend the listing plan approved by shareholders on 16 November 2012 because China Securities Regulatory Commission has released more listing requirements following a round of IPO reforms.
To meet the CSRC’s new stipulations, the company, among other things, has refined the provisions on its profit distribution policies.
It has also set out a revised plan to stabilise the stock price, if need be, in the three years after the listing. So if the company’s A-share price is less than its latest audited net asset value per share for 20 consecutive trading days, Galaxy Securities will launch actions to hep support it, which may include an increase in stakes by shareholders and the company’s management as well as a company share repurchase.
One source close to the company said Galaxy Securities hasn’t submitted its listing plans to the CSRC because the regulator is still amending some IPO rules and is not accepting documents at the present time. Market sources say CSRC may restart proceedings by the end of this month.
Domestic bankers believe more Chinese companies could follow suit having also put off an A-share listing in favour of just a H-share IPO, including PICC Group which raised HK$24 billion in December 2012.
Since China’s A-share IPO market was reopened for business, 43 enterprises have listed for a total of Rmb18.77 billion raised. The average price-to-earnings ratio has also risen to 28.82 times compared with 6 times in Hong Kong, according to a February report by a data provider ChinaScope.
However, bankers also point out that any A-share listings from companies already listed in Hong Kong may not come anytime soon, as more than 100 issuers have already submitted their applications and are waiting in the queue.
For that reason, some issuers who originally targeted a dual listing are likely to stick to a H-share listing for now before returning to the mainland market, including Harbin Bank which is waiting in the wings with a $1 billion IPO.
