Wider moratorium for Chinese IPOs
Filed Under (Other News) by Webmaster on 29-04-2010
Tagged Under : chinese, IPO, Securities Commission Malaysia
A wider moratorium on the sale of shares is being applied on new listings of China companies on Bursa Malaysia.
Investment banks sponsoring the new IPOs, in consultation with the Securities Commission (SC), have initiated the move which imposes at least a six-month moratorium not only on the promoters of the company – which has been the usual practice – but also on a list of other shareholders who have emerged prior to the IPO.
It is aimed at preventing a repeat of the heavy selling by a pre-IPO investor in one of the three listed Chinese companies.
This will be the first time a moratorium is placed on shareholders other than promoters of the listed company, in the context of listings of Bursa Malaysia, a party familiar with the situation said.
He added that the SC had the authority to widen the scope of the moratorium in the event it discoverd that there was a significant number of other parties (other than the promoters) who had invested in the company prior to its IPO.
The decision to do also suits a peculiarity of Chinese firms seeking a listing here.
A look at the prospectus of soon-to-be-listed Sozo Global Ltd reveals a long list of individuals who will be selling some of their shares as part of the IPO offering.
Many of these individuals are Malaysians or Singaporeans who have acted as consultants, guiding Sozo on their listing exercise here. It is understood that these consultants have been paid mostly in shares of the company.
Hence, it is only expected that these individuals are entitled to sell some of their shareholding at the IPO.
However, the investment banks and the SC have ensured that these individuals along with other pre-IPO shareholders will not be allowed to sell the bulk of their shares for at least six months.
“Some of them are ex-investment bankers whose business model is to now prepare and guide companies from China for listings in Singapore and Malaysia,” said a source.
However, it is noteworthy that in Sozo’s case, these individuals are only selling under a quarter of their shareholding, as the rest of their shares are locked up under the moratorium.
The basis of the expanded moratorium is that any shareholder who has invested in the entity being listed, prior to its IPO, has acquired those shares at a price lower than IPO investors.
Indeed, the entry cost of these shareholders is also revealed in the prospectuses.
Hence, allowing these earlier investors to sell into the market soon after the company is listed would be detrimental to investors who had just participated in the IPO exercise.
To recap, that is the fate that befell Multi Sports Holdings Ltd, one of the Chinese shoe makers listed here. Tan Sri Quek Leng Chan’s GuoLine Group Management Co Ltd had significantly sold down its holdings in the Chinese company soon after its IPO. GuoLine was a pre-IPO investor in Multi Sports.
However, it is left to be seen if this expanded moratorium will be sufficient to get institutional funds to buy the pending Chinese company IPOs as placees at the prices its promoters’ want.
But a party close to the IPO placement effort of Sozo Global said the firm was close to securing the investors for the exercise.
