Huatai Securities, the fourth-largest brokerage in China by revenue, has launched what could be the biggest IPO in Hong Kong in four years, drawing investment from China’s most famous tech entrepreneurs amid a sustained stock market rally.
The IPO, expected to raise as much as $5.2 bn, has attracted $1.9 bn of that in the form of cornerstone investment from Chinese tech billionaires Pony Ma, chairman of internet giant Tencent, William Ding, founder of news portal NetEase, and 11 others. Ma will invest $100 mn while Ding will invest $200 mn. Sequoia Capital and Hillhouse Capital will also invest $200 mn each.
The offering will price 1.4 bn Huatai Securities shares at between HK$20.68 and HK$24.80 ($2.67 to $3.21) each, representing a discount of between 27 percent and 39 percent off the firm’s Shanghai-listed shares, according to the Financial Times. Trading is to start in Hong Kong on June 1. Reuters, citing people familiar with the issue, reports that Huatai Securities will price the offering at the top end of the range.
The IPO plan comes after the Shanghai-listed shares of the securities firm more than doubled in the past six months and after the well-received IPO last month of GF Securities, a brokerage based in Guangzhou, China. GF’s shares, which listed at a 60 percent discount to the Shanghai-traded shares, have jumped by about a third since the $4.1 bn listing in Hong Kong.
CITIC Securities and China Galaxy Securities have also announced plans to sell shares in Hong Kong later this year. Chinese securities firms have seen their profits soar over the past year amid a stock market boom. According to the Securities Association of China, 119 out of the 120 brokerages posted a profit last year, bringing combined profits in the industry to 97 bn yuan ($15 bn). At the same time, China’s brokerages saw their assets almost double to 4.1 tn yuan at the end of 2014 from 2.1 tn a year earlier.
