Orient Securities Co.’s US$1.6 billion initial public offering, the largest listing in mainland China since 2011, was oversubscribed over 90 times as new rules capping IPO prices and soaring industry profits lured investors.
Under Chinese rules, the process involved in the firm’s roughly 10 billion yuan sale means the more than 930 billion yuan (US$148.59 billion) put forward to buy shares is now “frozen” for three days until a lottery takes place to decide who gets the stock, Reuters reported. The number was disclosed in a company statement posted on the Shanghai stock exchange on Friday.
The massive demand for shares in Orient Securities, a joint venture partner of a Citigroup Inc. unit, means the nearly US$150 billion funds now on ice is the largest amount frozen during a mainland Chinese IPO in five years.
The brokerage operates a joint venture with Shanghai-Citigroup Global Markets Asia, according to the JV’s website.
Despite the investor rush, Orient Securities’ listing comes amid concerns about China’s brokerages facing imminent competition from banks. Earlier this month China’s securities regulator said it is considering issuing brokerage licenses to lenders, triggering a fall in brokerage shares.
According to the Orient Securities statement, institutional investors set aside 432.5 billion yuan for the chance to purchase shares in the IPO. Retail investors put aside 506.5 billion yuan.
The funds will be frozen for three days, to be released on Mar. 16 and Mar. 17. But only a tiny fraction of investors will actually land shares: 0.59 percent of retail investors and 1.62 percent of institutional investors, the report said.
The total amount of funds frozen is the highest since China First Heavy Industries’s listing in 2010. Strong demand for that IPO led to the freezing of 960 billion yuan.
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