Brokerages catch IPO fever, eye growth
A number of Chinese securities companies either listed on domestic or overseas stock exchanges last year or have filed their prospectuses with the regulators concerned.
Against a backdrop of regulatory tightening and intense competition, growth- and expansion-minded brokerages will try to replenish net capital to meet liquidity requirements, scale up business and increase revenue. This should explain the current IPO rush, said Lu Yunting, an analyst at Zhongtai Securities Co Ltd.
Besides, as bond financing costs continue to increase, brokerages are increasingly turning to equity financing, Lu said.
Other experts said another factor may have also contributed to brokerages’ IPO fever. The Securities Association of China notified in November 2014 that brokerages should replenish their capital at least once in three years.
So, a number of brokerages made plans for an IPO at the end of 2014. But some delayed their listing over the last two years due to abnormal volatility in the stock market in 2015.
Futu Holdings Ltd, a Hong Kong-based online brokerage, plans to list on a US stock market in 2019. It filed for an initial public offering with the US Securities and Exchange Commission on Dec 28. It plans to list on Nasdaq under the symbol FHL and aims to raise up to $300 million.
The stock investing service provider posted revenues of HK$584 million (nearly $75 million) for the nine months ended Sept 30, 2018, up by 227 percent year-on-year.
The company has corporate shareholders, including entities affiliated to China’s internet giant Tencent, Matrix Partners China III Hong Kong Limited, and entities affiliated with US venture capital firm Sequoia, according to its prospectus.
Futu obtained a license from the Hong Kong’s Securities and Futures Commission in 2012. It mainly provides trading services in both Chinese and US stock markets.
The online brokerage also provides market data and news feed of Hong Kong, the Chinese mainland and US stock markets on its investing platform Futu Niuniu, which has more than 5 million users.
Bookrunners of the deal include Goldman Sachs (Asia), UBS Investment Bank and Credit Suisse. No information on pricing terms has been released so far.
Like Futu, many Chinese brokerages are still waiting for their moment to get listed.
BOC International (China) Co Ltd filed its prospectus with the China Securities Regulatory Commission on Dec 10 for Shanghai listing.
According to its prospectus, outstanding post-issue shares will not exceed 3.33 billion, of which the new shares will account for no more than 25 percent.
Earlier in December, the securities regulator approved Chinalin Securities Co Ltd’s IPO application to issue up to 270 million new shares.
Some of the brokerages succeeded in their IPO efforts last year. China Great Wall Securities Co Ltd was listed on the Small and Medium Enterprise Board of the Shenzhen Stock Exchange on Oct 26, following the IPOs of Nanjing Securities Co Ltd and CSC Financial Co Ltd on the Shanghai Stock Exchange in June.
In its latest IPO report published on Dec 27, accounting firm Ernst & Young said 105 companies were estimated to have listed on the A-share market in 2018, raising 138.7 billion yuan ($20 billion).
An estimated 205 companies listed in Hong Kong last year, raising HK$286.5 billion. Chinese mainland’s companies accounted for 43 percent of IPOs in Hong Kong and 95 percent of the funds raised.