The successful HK$7.22bn (US$932m) listing of China International Capital Corp, the country’s first investment bank, showed the Hong Kong market can deliver a long-term shareholder base for even the most challenging of deals.
CICC had already endured a long and arduous route to market, with questions circling over its growth plans amid a slowdown in dealmaking from China’s public sector – traditionally its major client base. It needed to engage investors who had already been burned on Chinese financial stocks during the summer stock rout.
While other Chinese companies were able to complete IPOs after the summer sell-off and before the end of IFR’s review period, CICC’s performance stood out. By December 14, it was the city’s only big new listing since July to remain above water.
When CICC started pre-marketing in mid-October, the Chinese brokerage sector was facing an uncertain future, with revenues under pressure and regulatory curbs on mainland share sales blocking some businesses. GF Securities was down almost 19% from its April IPO price, and Huatai Securities almost 30% below its June listing.
CICC, however, believed China’s IPO ban would be short-lived, and was confident that it could grow its brokerage business quickly once the capital was in place.
Adding to the challenge was a shareholder mandate that required CICC to sell its shares at no less than 1.2 times 2015 book value. At the time, heavyweight rival Citic Securities traded at about 1.3x forecast book value.
CICC marketed 611m shares (including 10% from China’s National Social Security Fund) at an indicative price range of HK$9.12–$10.28, or at a 2015 P/B of 1.2–1.3.
To help drive momentum, CICC brought in 10 cornerstone investors for a combined US$465m, or about 57% of the base deal.
On top of the usual “national team” investors, the transaction attracted some rare IPO participants such as Silk Road Fund (US$100m), China Mobile (US$50m) and Xinhua News Agency Investment (US$30m). Hong Kong fund Value Partners and US insurer Prudential also featured.
The book was covered on the first day of bookbuilding, and CICC priced at the top of the guidance range, offering no discount to where Citic Securities traded at the time.
China’s November 6 move to end a four-month halt on IPOs helped CICC soar 7.4% on debut on November 9. As of December 14, the stock was still 8% above water.
CICC and ABC International were the joint sponsors. They were also joint global coordinators and joint bookrunners with nine others – BoCom International, China Galaxy International, CMB International, CCB International, DBS, HSBC, ICBC International, Goldman Sachs and Southwest Securities.
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