Shaanxi Coal catches the A-share tide

The Chinese coal company is to meet investors on Thursday for its proposed Rmb9.8 billion ($1.6 billion) Shanghai listing as the first three A-share deals since market reforms receive a lot of love.

Mainland China’s equity market has burst into life since it reopened following Beijing’s reforms, with investors set to see the largest offering in at least two years.  

Shaanxi Coal Industry, one of China’s largest state-owned coal companies, is to meet investors on Thursday for its proposed Rmb9.8 billion ($1.6 billion) Shanghai listing.

The company plans to issue 1 billion new shares or 10% of the enlarged capital base through the IPO. Pricing is slated for January 15.

BOC International and CICC are joint sponsors, and Citic Securities is financial advisor. The three are also joint bookrunners on the deal.

Meanwhile, three other Chinese companies have priced their A-share listings, the first batch under the new IPO rules recently released by the China Securities Regulatory Commission.

The response to the three deals has proved that market sentiment towards new listings is warming.

Neway issued 82.5 million shares - 50 million new shares and 32.5 million old - sold by three existing shareholders. The 20 investors subscribed to 139 million shares during bookbuilding, representing 2.4 times the initial institutional portion.

The other issuers, Guangdong Xinbao Electrical Appliances and Zhejiang Wolwo Bio-Pharmaceutical, have secured 481 and 499 participants for their Rmb798 million and Rmb506 million Shenzhen listings, respectively.

Books of the two deals were 102.5 and 113.5 times covered.

“It’s too hard to get the shares as the deals are too hot,” said a Shenzhen-based investment manager who failed to get any shares of the three companies.

The investor also said the bookrunners preferred to allocate shares to large institutions or those with a deep relationship with them.

China Securities was sole bookrunner on the Neway deal, while Dongguan Securities and Daiwa SSC Securities were on the Xinbao and Wolwo transactions.

Institutional investors like the new listings but also have some complaints about the pricing consultancy process.

According to the new rules, deal sponsors should remove the top 10% orders as invalid orders. The purpose of this rule is to curb the high valuations that were a feature of previous A-share IPOs. 

“Our bid can’t be too high, because we don’t want to be kicked out. But it can’t be too low neither, because if so we may be not able to get the shares,” said a Shanghai-based fund manager with a mid-sized securities house.

Investors’ dilemma is highlighted by the broad price ranges seen. Xinbao has received orders from Rmb5.0-Rmb21.1, Wolwo Rmb13.61-Rmb36.10 and Neway Rmb6.0-Rmb25.83.

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