GF Securities Said to Weigh 40% Discount in Hong Kong Share Sale

GF Securities Co. is considering offering investors in a Hong Kong share sale at least a 40 percent discount to its China-traded stock, people with knowledge of the matter said.

The fourth-biggest Chinese brokerage by market value plans to start the $3 billion offering next week, the people said. Some major investors demanded a minimum 40 percent discount to the company’s Shenzhen-traded stock when GF Securities gauged demand for the sale, they said, asking not to be identified as the information is private.

Chinese brokerages are seeking funds to expand as transaction volumes soar in the country’s $6.1 trillion stock market. Market leader Citic Securities Co. and third-largest Haitong Securities Co. are planning Hong Kong share sales that could raise more than $9 billion.

GF Securities plans to sell a stake of about 20 percent in the offering, which may value the brokerage at about 1.57 times estimated 2015 book value after the sale, according to the people. A Hong Kong-based external spokeswoman for GF Securities declined to comment.

Citic Securities’s Hong Kong-listed shares trade at a 33 percent discount to its Shanghai stock, while the discount for Haitong Securities is 39 percent, according to data compiled by Bloomberg.

GF Securities, based in Guangzhou, plans to set aside about 40 percent of the offering for so-called cornerstone investors, the people said. Such buyers typically agree to hold on to their stock for six months in return for guaranteed allocation.

The Chinese brokerage rose 5 percent in Shenzhen today, capping a 140 percent rally in the last six months. Citic Securities has surged 129 percent in Shanghai in the same period, compared to a 119 percent rally of Haitong Securities’s domestic shares.

Goldman Sachs Group Inc. and GF Securities’s Hong Kong unit are joint sponsors of the share sale, according to a March 16 pre-IPO filing.

Before it's here, it's on the Bloomberg Terminal.