Brokerages catch IPO fever, eye growth


China Daily (Hong Kong) - - MARKETS - By JIANG XUEQING jiangx­ue­[email protected]­ Xin­hua con­trib­uted to this story.

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.

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