Photographer: Anthony Kwan/Bloomberg

China Contractor Drops IPO as Director Under Police Surveillance

Chinese construction contractor New Headline Holdings Ltd. shelved a HK$340 million ($44 million) initial public offering in Hong Kong after a key executive, who is also the chairman’s wife, was put under police surveillance. 

Executive Director Xie Birui is under “designated residence surveillance” by the Public Security Bureau of Lianyungang, the city in eastern China’s Jiangsu province where the company is based, according to an exchange filing Tuesday. Xie, the 45-year-old wife of New Headline Chairman Wei Hua, was responsible for strategic planning and overall business development, the IPO prospectus shows.

The company is still ascertaining further particulars about the incident and decided to postpone the share sale, it said in Tuesday’s filing, which didn’t provide further details. The company will return the money of investors who had already subscribed for the offering. A Hong Kong-based external spokesman for New Headline declined to comment on the details of Xie’s situation and whether the offering will be relaunched.

New Headline was seeking to list on the Growth Enterprise Market, which hosts some of Hong Kong’s wildest stock movements. The board has been so beset by scandals that the bourse operator’s chief executive officer warned in February it was damaging the city’s reputation as a financial center. 

Hong Kong Exchanges & Clearing Ltd. proposed sweeping changes to GEM in June, including higher minimum market-value requirements and tighter rules on when controlling shareholders can sell their stakes. The same month, a string of Hong Kong small-cap stocks abruptly plunged, losing a combined $6.1 billion in market value. 

Guotai Junan International Holdings Ltd. was the sole sponsor of New Headline’s IPO, while Gransing Securities Co. and SPDB International Capital Ltd. were joint bookrunners. The company had offered 200 million shares at as much as HK$1.70 apiece. It was planning to price the share sale on July 6 and begin trading July 19, the prospectus shows.

New Headline is a contractor for municipal works projects like road construction, earthworks engineering and public facility maintenance. It also provides construction project management and landscaping services and supplies gneiss, a type of rock used by property developers.

The company’s net income more than doubled last year to 120 million yuan ($17.7 million) as it won more public-private partnership contracts. Its revenue rose 81 percent to 375 million yuan.

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