Shares of Suzhou HYC Technology, the first company to launch an IPO on Shanghai Stock Exchange’s new Star Market, have been oversubscribed 335.6 times after investors shrugged off criticism into its dressed up prospectus.
The company set its initial public offering price at 24.26 yuan per share, it said in a filing on Wednesday, valuing it at 41 times its 2018 earnings.
If the bids below the final IPO price are excluded, the shares were still oversubscribed 257.6 times, the filing added.
Suzhou HYC Tech is set to raise 97.2 million yuan from 40.1 million new shares, giving it a market cap of 9.7 billion yuan.
Huatai Chuangxin, a subsidiary of the IPO sponsor Huatai Securities, will buy 1.6 million shares, or 4.1 per cent of the IPO, as the Star Market’s rules require the sponsor to invest in the company. The shares will have a lock-in period of 24 months.
The company will take formal subscriptions on Thursday, and will announce the final allotment results on July 3.
Yin Jun, a fund manager with Shanghai Bluelake Investment, said he would join the formal subscription process as he believes in the growth prospects of Suzhou HYC in the short term.
“Business wise, HYC resembles ChiNext-listed Wuhan Jingce Electronic. HYC’s valuation turned out to be a bit higher than we expected, which makes it a bit more expensive than Jingce. But the new Star board is hot, as we see intense overbidding from investors,” he said.
“But frankly speaking, I cannot tell if there will be many value investment opportunities in the new board,” he added.
Some financial bloggers have challenged the way HYC presented itself in the listing prospectus, alleging that it used too many references to “chips”, although 98 per cent of the company’s revenue comes from testing equipment for electronic displays.
“The company mentioned ‘integrated circuit’ 245 times and ‘semiconductors’ 122 times in its prospectus to make people believe it is a chip maker. But if you read carefully, you will find integrated circuits made up only 0.2 per cent of its total revenue in the past three years,” according to a blog post by “Fangniutang” on WeChat.
HYC issued a statement saying the claims made by bloggers were “factually wrong”.
The IPO pricing also confirmed an earlier commitment made by the Shanghai Stock Exchange to scrap an intangible valuation cap at 23 times earnings for IPO candidates.
The Star Market, officially launched on June 13, was mooted by President Xi Jinping in November to give technology firms a new platform to raise funds as part of China’s ambition to become a world-class player in the tech sector.
China still ‘exploring’ international board for foreign companies to raise funds on Shanghai Stock Exchange
Another IPO listing candidate on the Star board, Ankon Technologies, has been accused of inflating sales and the number of branches it operates, according to a report by online media jiemian.com on Wednesday.
Ankon, which is based in Wuhan, issued a statement saying the claims made in the report were not factually correct.
The Shanghai Stock Exchange issued a statement last Thursday, warning against provocative blogs on social media and reports in independent media outlets. However, the stock exchange issued a second statement later that day, with a softened tone, saying it welcomed supervision from the media.
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