Jiangsu Aosaikang Pharmaceutical Co. (300361) postponed its 4.05 billion yuan ($669 million) initial public offering, which would have been the biggest on China’s market for startups, after pricing the deal 21 percent higher than the industry average.
The Nanjing-based maker of cancer drugs delayed the offering on Shenzhen’s ChiNext board until an unspecified date because the sale would have been “relatively large,” it said in a statement to the exchange dated today. The sale valued Aosaikang at 67 times 2012 earnings compared with the average 55.3 times for ChiNext-listed drugmakers, the company said, citing Shenzhen Securities Information Co. data.
Aosaikang’s offering was part of the first batch of domestic IPOs since the China Securities Regulatory Commission ended a more than yearlong ban after overhauling share-sale rules. The benchmark Shanghai Composite Index (SHCOMP) fell 3.4 percent this week on concern the quickening pace of new share approvals will tighten the availability of funds.
“The regulator may have stepped in to ask for the halt as the company is selling shares at too high a valuation, which the CSRC can’t tolerate,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai. “The new IPO rules haven’t tackled many of the old issues such as overpricing, and the regulator has a lot to do.”
The company referred requests for comment to public-relations agency Roya Investment Services Ltd., where no one was immediately available to comment. The CSRC didn’t immediately respond to a faxed request for comment.
The CSRC didn’t order Aosaikang to halt its IPO, and the decision was made by the company and its underwriter, the official Shanghai Securities News reported today on its website, citing CSRC spokesman Deng Ge.
Aosaikang had planned to sell 11.9 million new shares at 72.99 yuan each, while shareholders were selling 43.6 million shares, according to a statement dated yesterday. The company was scheduled to start taking orders today for the offer, which would have surpassed Beijing Originwater Technology Co.’s $374 million share sale in April 2010 as the largest ChiNext IPO.
The securities regulator introduced rules in November designed to stamp out price manipulation that had produced excessively high valuations for companies going public. Rich valuations helped make China the world’s largest IPO market in 2010, when price-to-earnings ratios of Chinese IPOs averaged 58 times in 2010, according to former CSRC Chairman Guo Shuqing.
Fifty-one companies have started the IPO process since the end of December, the CSRC said on its official microblog today. Most of the companies that have passed their review meetings will be able to start selling shares from March, after submitting their 2013 annual reports, the regulator said.
Shaanxi Coal Industry Co., China’s third-largest producer of the fuel, said Jan. 8 it plans to raise 9.83 billion yuan from China’s biggest IPO in more than two years. The company will sell 1 billion A shares on the Shanghai Stock Exchange on Jan. 17, it said in a statement to the bourse.
Chinese regulators are considering adjusting the pace of IPOs and suggesting some companies suspend their listing process, the 21st Century Business Herald newspaper reported Jan. 8, citing an unidentified person.
China Postal Express & Logistics Co., the country’s biggest package shipper, said Dec. 27 it retracted its application for a Shanghai IPO to strengthen its competitiveness amid changes in the industry. The company had planned to seek about $1.5 billion from the share sale, people familiar with the situation said last month.
Aosaikang first secured approval from the CSRC’s listing review committee in July 2012. It won final approval for its offering on Dec. 31 after the regulator resumed IPOs.
China International Capital Corp. was the underwriter of Aosaikang’s IPO.