iSteelAsia to list 100 million shares at HK$1.08, an online steel trading portal, will list on Hong Kong''s GEM at HK$1.08 a share, scaling back earlier targets., an online commercial platform for buyers and sellers of steel, will list one million new shares on Hong Kong's Growth Enterprise Market at HK$1.08 ($0.14) a share to help fund acquisitions and expand its existing business.

In addition, iSteelAsia agreed to sell 72 million shares to Hong Kong tycoon Li Ka-shing through the Li Ka-shing Foundation, a charity, at 80 cents a share - 26% below the issue price. The price was agreed last December when Li said he would invest in the company.

Hong Kong-based iSteelAsia originally planned to issue 248 million shares at between HK$1.55 to HK$2, in the hope of raising as much as HK$496 million. The plunge in global stock markets, particularly technology stocks, caused it to revise its plans.

"The company had two options,' says Michael Li, executive director of BNP Prime Peregrine, lead manager of the listing. "One to postpone, one to go ahead - and since getting a listing is a vital part of their business strategy we decided to go ahead but to issue fewer shares.'


Unless the stock soars beyond all expectations, the money from the listing won't be enough to sustain the company's growth for much more than 12 to 18 months, iSteelAsia says. It's hoping the market will recover so that it can sell at least the 148 million shares it held back this time in a secondary listing.

Though the timing of its share sale may be bad, analysts say iSteelAsia itself has greater potential to be profitable than many of those who have preceded it to the market. Unlike broad-based websites - so-called "horizontals" - that provide content or services across a range of industries, iSteelAsia brings together buyers and sellers in a specific industry. It's the first "vertical" company to list on the GEM.

"I would say it's a better focused website than the common content provider, so concept-wise it's a much better bet,' says Steven Cheng, internet analyst at Tanrich Research in Hong Kong.

At this point though, many investors are too panicky to differentiate between good and bad bets. The GEM index has fallen 40% in the past month. In scaling back the number and price of shares, iSteelAsia has had to stretch to meet GEM requirements that at least 15% of the enlarged share capital reach the hands of the public.

The 100 million shares it plans to place in the listing will represent just 6.89% of the company - not enough to generate liquidity in the stock or attract the attention of investment analysts. Counting Li's holding, which the company and stock exchange consider a public stake, the free-float rises to 11.85%, still not enough to satisfy the listing requirements.

Who gets what

To get around the problem, iSteelAsia's majority owner, building and steel supplier Van Shung Chong, will give 285 million of its shares in iSteelAsia to Van Shung Chong shareholders in a ratio of about 1.35 to 1.67 shares for every 2,000 VSC shares held. But since VSC is 57%-owned by members of the Yao family through a company called Huge Top Industrial, Huge Top will get 162,832,944 shares under the distribution, according to the prospectus.

Family members and friends of the Yao family who are also individual stockholders in VSC will get an additional 12 million of the distributed shares, leaving about 110 million in the hands of VSC employees and shareholders who are unrelated to the Yao family. That 110 million brings the public ownership of iSteelAsia to 20.28%.

After the listing and distribution of shares, VSC and its friends will own 66% of iSteelAsia, down from their current 80% holding. iMerchants, a Hong Kong-based internet startup that itself listed less-than-illustriously on the GEM in March, will hold 14%, down from its current 20% stake. The public, including Li, will hold the rest. So, on paper iSteelAsia meets the stock exchange requirements, but, given the tight holdings, it could be a fairly illiquid stock. Trading is set to begin April 20.