Chinese firms price IPOs at discounts after regulator steps up supervision
SHANGHAI (Reuters) - Three small Chinese companies have decided to sell shares at valuations much lower than those of peers just days after the securities regulator issued a new rule to prevent excessive stock pricing.
Beijing Utour International Travel Service Co Ltd, Yangzhou Yangjie Electronic Technology Co Ltd and Hebei Huijin Electromechanical Co Ltd plan to list on the Shenzhen Stock Exchange to raise a combined 1.03 billion yuan ($170 million).
The three may have raised more funds by setting higher share prices, which could have been possible given the strong demand for their securities.
The low pricing comes as bankers worry that the regulator's increased supervision may lead to companies scaling back fundraising plans as initial public offerings resume after a year-long hiatus.
The China Securities Regulatory Commission (CSRC) on Sunday said companies pricing shares at a premium to those of peers must delay sales by three weeks to publish risk warnings.
The statement came as Jiangsu Aosaikang Pharmaceutical Co Ltd postponed its IPO after pricing shares above the industry average. Sources told Reuters its delay was due to regulatory pressure though the CSRC denied it.
Seven companies have postponed IPOs since the market reopened two weeks ago.
Beijing Utour, in a document posted on the Shenzhen Stock Exchange website, said it is selling 14.6 million shares at 23.15 yuan ($3.83) each.
It said the price is equivalent to 22.05 times its 2012 net profit compared with a peer average price-to-earnings ratio of 42.52.
The company disregarded over 96 percent of institutional investor bids in line with new rules specifying that all bids above the IPO price must be discounted.
The high elimination rate indicates the price is significantly lower than institutional investors' expectations and reinforces analyst concern that regulator action will elbow out market forces in the IPO valuation process.
Neither Beijing Utour, which will trade under the ticker 002707.SZ, nor lead underwriter Huatai United Securities could be reached for comment.
Fellow Shenzhen exchange aspirants Yangzhou Yangjie and Hebei Huijin also said they had rejected around 94 percent and 96 percent of bids, respectively, after setting their IPO prices.
Yangzhou Yangjie is selling 20.6 million shares at 19.5 yuan each, and Hebei Huijin is selling 15.4 million shares at 18.77 yuan.
Both priced their IPOs below the industry average, according to their prospectuses.
More than 50 companies have announced plans to list on the Shanghai and Shenzhen bourses after the CSRC last month said it would permit the resumption of IPOs which it suspended in November 2012. ($1 = 6.0434 Chinese yuan)
(Reporting by Shanghai Newsroom; Editing by Kazunori Takada and Christopher Cushing)