Eight days after Chinese PC Company Lenovo lodged a blockbuster stock-sale application on the Shanghai Stock Exchange, it’s suddenly been withdrawn after the stock exchange, said it has ceased the review process and asked for the placement to be halted.
It’s not known whether the Communist run Chinese Government had anything to do with the decision or whether the move was part of a new operation against large Chinese Companies following Beijing’s wider crackdown on tech giants which has wiped more than $1 trillion from the value of tech stocks in China as the US and China go head-to-head on trade issues.
For many years, Alibaba’s major shareholder Jack Ma was the poster child for China’s technological rise, until he gave a controversial speech which led to the Communist Party turning him into “public enemy number one”.
He is now $32 billion dollars poorer.
Lenovo, whose shares are already listed on the New York and Hong Kong exchanges, had planned to raise up to raise A$2.1 billion in Shanghai, making it the first Chinese company to sell so-called Chinese Depositary Receipts (CDRs) on China’s financial marketplace for technology companies.
The Shanghai Stock Exchange (SSE), which manages the Star Market, said it has ceased the review process for Lenovo’s application to sell shares early on Friday October 8th and had approached Lenovo to withdraw the application along with its listing sponsor China International Capital Corporation (CICC), according to a statement issued by the Exchange.
The withdrawal is the second-biggest IPO cancellation in Shanghai since Ant Group, had its US$39.7 billion dual listing foiled in November 2020.
The surprise cancellation is a setback for the Star Market’s push to attract offshore listed Chinese companies to list at home, part of the Chinese President Xi Jinping’s edict for domestic investors to enjoy the capital growth of the nation’s technology champions claims Chinese newspaper The South China Morning Post which is actually owned by Alibaba.
Lenovo is the first so-called Red Chip company to raise funds in Shanghai through CDRs claims the Post.
Red Chips, listed in Hong Kong, are offshore-incorporated companies whose assets and businesses are in China.
Depositary receipts are certificates issued by banks that represent shares issued by companies, typically by those domiciled outside the market where they are traded. The CDR is China’s attempt to broaden and deepen the nation’s onshore capital market in Shanghai and Shenzhen. Lenovo had applied to sell 1.3 billion CDRs, each receipt representing one Lenovo share.
Recently Lenovo shares have been on a major roll, in first-quarter profit surged almost 120 per cent to US$466 million as revenue rose 27 per cent to US$16.9 billion from last year.
The company’s net income margin hit its highest level for several years at 2.8 per cent.
It has a registered office in Hong Kong and has 63,000 employees on staff across 180 worldwide markets.
Lenovo’s shares have risen 2.7 per cent in Hong since the SSE accepted its CDR sale plan on September 30.
When the announcement was made by the Shanghai Stock Exchange Lenovo shares fell 4.67%
