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September 22, 2009

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Home » Business » Finance

Local firm among 10 set to sell GEM stock

SHANGHAI Bestway Marine Engineering Design Co and nine other mainland start-up firms plan to sell shares on Friday ahead of their listing as the first companies to trade on China's long-awaited Nasdaq-style board.

The firms, mostly involved in the pharmaceutical and technology sectors, are expected to raise a combined 2.8 billion yuan (US$409 million) through the sale of 246.7 million shares to be traded on the new Growth Enterprise Market in Shenzhen, according to company prospectuses.

"The market is filled with risks for investors, but for pioneers in innovative industries, there are big profits to be made from the new board," said Li Daxiao, research head of Yingda Securities.

China is launching the new market to help small firms with big ideas to raise money.

Smaller firms account for 99 percent of all companies in China and 75 percent of employment. Still, banks have been reluctant to provide them financing because they don't have solid track records.

The Growth Enterprise Market, which is expected to open next month, has been in the planning stages for a decade. It was delayed several times because of a variety of concerns, ranging from the after-effects of the dotcom bubble collapse to last year's market nosedive.

Its listing requirements are more lenient than those of the main stock exchanges in Shanghai and Shenzhen.

"The lower threshold has widened financing channels for smaller but fast-growing companies," said Jing Ulrich, chairwoman of China equities for JPMorgan Chase.

Bestway, which specializes in ship design, is the only company in the Shanghai that has won approval to date to float shares on the new board. The company's prospectus shines a light on the plight of struggling young companies trying to gain a foothold.

Bestway Chairman Liu Nan used to work in state-run China State Shipbuilding Corp. In 2001, he quit the company with four colleagues to launch Bestway. The company had to fight to gain a foothold in a market dominated by state-run and foreign companies.

It didn't lose heart. Today it employs more than 370 staff, and its profit in the first half of this year climbed to 21.45 million yuan.

Bestway plans to issue 12.6 million shares, accounting for 25 percent of its expanded share capital after the IPO, to raise about 120.56 million yuan. The price of the offer is expected to be announced today.

Seventeen companies have been approved for IPOs on the Growth Enterprise Market, and the application approval process is continuing. Two Shanghai firms - TJ Innova Engineering & Technology Co and ChinaNetCenter Co - will be vetted today.


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