Shenwan Hongyuan IPO Is Largest Offering In Hong Kong This Year
China's oldest sixth largest brokerage firm is reportedly going public in Hong Kong in an attempt to raise as much as US$1.25 billion in new capital. Shenwan Hongyuan will be Hong Kong's largest IPO this year when it goes public as it ramps up its plans to expand its operation overseas.
The company is currently already listed on the Shenzhen Stock Exchange, which means that it will be the 12th Chinese brokerage firm to be dual-listed in Hong Kong and Mainland China. During its IPO, the company plans to sell a total of 2.5 billion shares.
Shares will reportedly be offered between HK$3.63 and HK$3.93 per piece. The firm is expected to release the official pricing of its stocks on April 18, with a debut in Hong Kong scheduled on April 26.
Around 94 percent of the shares will be offered to major institutional investors, while the rest of the shares will be offered to the public. As of this year, the firm has managed to raise around US$330 million through bond sales, leaving it with an outstanding bond principal of around US$9.6 billion.
Shenwan Hongyuan is majorly controlled by the state-owned own firm Central Huijin Investment. The brokerage firm is the result of a number of mergers between China's largest and oldest securities firms, including Wanguo Securities and Shenyin Securities.
Wangou was previously the biggest securities brokerage in China and was founded by Guan Jinshen, considered to be the country's godfather of securities. Guan was unfortunately charged with bribery and abuse of public funds in 1995 due to a series of trades now famously known as the "327 incident."
The announcement of the IPO comes at the heels of the company's earnings call, which saw its net profits fall by around 9.6 percent. The significant fall has been attributed by the firm to the recent drop in brokerage fees and commissions in the industry.
The firm's investment banking revenues also saw a massive drop last year, by as much as 37 percent, which was directly correlated to lowered brokerage fees. The firm also reported write-offs of around US$92 million in credit impairment losses, which included write-offs to Shanghai RAAS Blood Products, Harbin Gloria Pharmaceuticals, and Zhongnan Red Cultural Group.
According to the company's chief financial officer, Yang Changyun, the entire industry apparently struggled last year due to the country's slowing economic growth. The drop in the Shanghai Composite Index by about 24.5 percent last year was one of the biggest factors in the decline of the securities markets.