Huatai Securities, a leading brokerage company in China, priced its shares at the bottom end of the indicative range in its Shanghai IPO, failing to raise the maximum amount due to poor sentiment for new listings.

 

The company raised 15.69 billion renminbi (USD2.3 billion) in the largest A-share IPO so far this year after issuing a total of 784.6 million shares. The shares were at 20 renminbi apiece, the bottom end of the indicative range between 20 renminbi to 22 renminbi. It was the second company after China First Heavy Industries that failed to raise the maximum amount in a Shanghai IPO due to poor sentiment.

 

Mainland IPOs, which used to be highly priced after drawing overwhelming response, have priced less aggressively after a number of giant IPOs performed weakly on debut. In January, China XD Electric became the first IPO to drop below the offering price on the first day of trading since 2006.

 

The offering price of Huatai Securities represents the 2009 price-earnings ratio of 24.39 times before the IPO and 29.41 times after the IPO with enlarged capital. Haitong Securities is the lead manager of the sale.

 

70% of the shares were finally allocated to retail investors through online subscription and 30% were allocated to institutional investors through offline subscription. The company decided not to exercise the over-allotment option. The IPO drew moderate demand from investors, with subscriptions equivalent to 3.05 times in the institutional tranche and about 7 times from both retail and institutional investors in the online sale. Institutional investors that received allocations include Ping An and the National Council for Social Security Fund.

 

The Nanjing-based securities firm, which was founded in 1991, has 183 outlets across China. Huatai was the tenth biggest company by assets out of 107 securities companies in China at the end of 2008. Its profit almost tripled to 4 billion renminbi in 2009, according to its prospectus.

 

The securities company plans to use the proceeds to strengthen its capability in core businesses including underwriting, brokerage and asset management. It also hopes to further expand into new businesses such as margin trading, derivatives and private equity.