300% Over-subscription For Foxconn Unit’s $4.27 Billion IPO In China

There was 300 per cent oversubscription for the stocks of Foxconn Industrial Internet in what is being touted as China’s biggest IPO in the last three years

Driven by expectations of a price rise following the listing, there was high interest in the shares of the company among investors in mainland China.

The 1.8 billion IPO shares of the company was priced at 13.77 yuan (US$2.16) a piece. The company is a direct subsidiary of the largest contract electronics manufacturer in the world and is the major contractor for Apple’s iPhones. The company is now set to be valued at 27.1 billion yuan (US$4.27 billion) which makes it the largest new listing in China in three years.

The company said in a statement that there was 294 times oversubscription for the 1.06 billion shares that were allocated for public investors through online subscription.

Institutional and corporate investors would be offered the remaining stocks.

“Technology stocks are the darlings of Chinese investors, and Foxconn will see its share price jump after trading debut,” said Ivan Li, an asset manager with hedge fund Loyal Wealth Management. “It remains to be seen whether it will become the largest A-share tech company in terms of capitalisation.”

Since the 30 billion yuan IPO offering by Guotai Junan Securities in June 2015, Foxconn’s IPO is set to be the largest on the A-share market. this would give a total market valuation of 271.2 billion yuan to the company.

It would also be the second-largest tech company by market value on the mainland stock exchanges while it will only trail on the Shenzhen-listed Hangzhou Hikvision Digital Technology.

The date for Foxconn’s listing debut would be set by the Shanghai Stock Exchange.

A price-to-earnings ratio of 17.1 was the result of the offering price of 13.77 yuan and the number was below the average multiple of about 40 among its existing A-share counterparts.

Foxconn will top 30 yuan after trading begins is the consensus forecast among analysts. And in case that event happens, it would peg the total market capitalization of the company at over 540 billion yuan which would be about 50 per cent higher than Hikvision.

The company said that the revenues generated form IPO would be put to use for financing of eight new projects that includes cloud computing, development of a data centre, technologies for 5G mobile network, project on internet of things and for expanding into the so-called intelligent manufacturing.

China is now focused on enhancing the technological innovations in the country and as a consequence, authorities have hastened up approvals of IPOs for technology companies which also includes those from foreign companies.

It took just five weeks since its application for Foxconn to get the green signal or the IPO launch by the IPO review procedure of the China Securities Regulatory Commission in March.

Typically, it used to take about one and half years to get a green signal from the Chinese authorities for an IPO applicant.

(Adapted from SCMP.com)

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Categories: Economy & Finance, Strategy, Sustainability, Uncategorized

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