Beijing-Shanghai High Speed Railway, the operator of the rail link between China's two biggest cities, made a strong debut on Thursday, with its shares rising by the maximum allowed limit under the Shanghai Stock Exchange trading rules.
The shares surged 44 per cent to 6.99 yuan after the opening, before settling at 6.38 yuan at 11.30am when the morning trading session ended. That is still some 30 per cent above its initial public offering price.
The railway operator netted 30.7 billion yuan (US$4.5 billion) by selling 6.29 billion shares at 4.88 apiece, among the biggest IPOs over the past decade. Postal Savings Bank of China raised almost 33 billion yuan last month. Beijing-Shanghai High Speed Railway trimmed its offering by 17 per cent without giving a reason.
Beijing-Shanghai High Speed Railway, which operates the 1,300-kilometre rail line, achieved 9.52 billion yuan in net profit on revenue of 25 billion yuan in the nine months to September 30, according to information in its listing prospectus. Its profit margin was higher than iPhone maker Apple and liquor producer Kweichow Moutai.
Last year, 203 mainland companies raised a combined 253 billion yuan from their IPOs on Shanghai and Shenzhen stock exchanges, according to official data. That was the highest amount since 2011.
China is seeking to further liberalise the IPO pricing mechanism to give market players more room to determine the value of IPO applicants after experimenting with a registration-based share offering system. Beijing-Shanghai High Speed Railway priced its new stock at 23.39 times earnings multiple, above the current cap of 23 times.
Lu Dongfu, chairman of China Railway Corporation, parent of the Beijing-Shanghai High Speed Railway, said earlier this month that the IPO was just the beginning of fundraising campaign involving key players in the national railway network.
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