Companies struggle on first day of trading
By Lydia Chen |
July 21, 2011, Thursday
|
Print Edition
Print Edition
SIXTY-THREE of 167 firms newly listed on Chinese mainland markets this year fell below their initial public offering price on their trading debuts, a report by China Venture said yesterday.
The report said both high valuations and a large number of IPOs led to the poor debuts.
So far this year, 38 percent of the firms tumbled below their IPO prices on their first trading day, compared with 9.7 percent in the same period last year and 7.5 percent for all of 2010, the financial analysis firm said.
Of the firms making trading debuts this year, Pangda Automobile Trade Co dropped the most at nearly 24 percent on its first day. Jiangsu Skyray Instrument Co posted the second biggest decline at nearly 17 percent, the report said.
Pangda had an IPO price-to-earnings ratio of nearly 40 times while Skyray's ratio was almost 73 times.
China Venture analysts said a big factor in the price dives was unreasonably high valuations set by underwriters.
Average price-to-earnings ratios for new listings in the first half fell to almost 54 times from 58.4 times in the same period last year.
However, the average price-to-earnings ratio was about 30 times in 2007 and 2008, China Venture added.
New shares listed on the ChiNext board from January to June had an average price-to-earnings ratio of 60 times. The Nasdaq-like board for start-ups saw 27 of 63 firms sustain price drops on their trading debuts.
The board for small and medium-sized enterprises had 24 firms post price drops on their debuts while the Shanghai board had 12 such cases.
The large number of IPOs also played a role in the disappointing performances, the report said.
The China Securities Regulatory Commission suspended approval of IPOs in October 2008, when the Shanghai Composite Index fell drastically amid the global financial crisis. The CSRC resumed approving initial public offering applications in late 2009.
In the first half of 2010, 175 firms made their trading debuts compared to 58 in the same period of 2008.
The report said both high valuations and a large number of IPOs led to the poor debuts.
So far this year, 38 percent of the firms tumbled below their IPO prices on their first trading day, compared with 9.7 percent in the same period last year and 7.5 percent for all of 2010, the financial analysis firm said.
Of the firms making trading debuts this year, Pangda Automobile Trade Co dropped the most at nearly 24 percent on its first day. Jiangsu Skyray Instrument Co posted the second biggest decline at nearly 17 percent, the report said.
Pangda had an IPO price-to-earnings ratio of nearly 40 times while Skyray's ratio was almost 73 times.
China Venture analysts said a big factor in the price dives was unreasonably high valuations set by underwriters.
Average price-to-earnings ratios for new listings in the first half fell to almost 54 times from 58.4 times in the same period last year.
However, the average price-to-earnings ratio was about 30 times in 2007 and 2008, China Venture added.
New shares listed on the ChiNext board from January to June had an average price-to-earnings ratio of 60 times. The Nasdaq-like board for start-ups saw 27 of 63 firms sustain price drops on their trading debuts.
The board for small and medium-sized enterprises had 24 firms post price drops on their debuts while the Shanghai board had 12 such cases.
The large number of IPOs also played a role in the disappointing performances, the report said.
The China Securities Regulatory Commission suspended approval of IPOs in October 2008, when the Shanghai Composite Index fell drastically amid the global financial crisis. The CSRC resumed approving initial public offering applications in late 2009.
In the first half of 2010, 175 firms made their trading debuts compared to 58 in the same period of 2008.
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