CHINA / National
Air China cuts IPO issue on weak demand
(AFP)
Updated: 2006-08-08 17:17
Air China, the national flag carrier, has said it has scaled back its
planned one-billion-dollar IPO in Shanghai by nearly half due to weak
investor interest.
Air China now plans to issue 1.639 billion A-shares at 2.80 yuan (35 US
cents) per share in its initial public offering (IPO), the carrier said
in a statement to the Shanghai stock exchange.
The reduction of nearly 10 billion shares means the carrier, already
listed in Hong Kong and London, will now raise no more than about 570
million dollars compared with the one billion dollars it had originally
hoped for.
"The subscription didnt reach our expectations," said Liu Jinquan, with
Beijing-based Galaxy Securities, which is underwriting the deal with
CITIC Securities and China International Capital.
The lackluster demand comes as a blow to Air China, which had hoped to
capitalize on the recent rush for new domestic shares sales after a
year-long suspension on public fundraising was lifted in June.
Investors had previously greeted new China issues with unabashed
enthusiasm, with Bank of China raising 19.99 billion yuan on July 5, in
the biggest-ever mainland IPO.
But signs of waning interest in the domestic market could be seen this
month when Daqin Railway disappointed with a rise of only 11.5 percent on
the day that it listed.
This could bode poorly for the Industrial and Commercial Bank of China
(ICBC), the country's biggest lender, which last month was given central
government approval for a massive dual listing in Hong Kong and Shanghai.
"The negative influence will probably extend to other IPOs," Shen Jun, an
analyst with Guosen Securities in Shanghai.
Air China had said the proceeds of the share sale were to be used to buy
new aircraft, including 20 Airbus 330-200s, 15 Boeing 787s, and 10 Boeing
737-800s.
The money was also to be spent on expanding its operations at Beijing
Capital International Airport, its home base.
Galaxy Securities' Liu said the lower-than-expected interest would not
impact Air China's spending plans, although the airline made no mention
of it in the statement.
The new IPO price implies a price-to-earnings ratio of 18.67 times the
company's diluted earnings in 2005, it said.
The airline said it would sell 350 million A-shares to strategic
investors, 469.5 million shares to institutional funds and 819.5 million
shares to retail investors.
Subscriptions to the retail offer will start on Wednesday and the shares
will be listed on the Shanghai stock exchange on or before Aug 22, the
airline said.
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