Industrial and Commercial Bank of China (ICBC) said yesterday it would
exercise a 15-per cent overallotment option on the Shanghai stock exchange,
boosting its initial public offering (IPO) to US$21.9 billion.
By doing so, ICBC will become the first greenshoe on the mainland.
ICBC, the mainland's largest lender that had raised a record US$19 billion in
the first simultaneous Hong Kong and Shanghai IPO, is expected to exercise the
overallotment option in Hong Kong after the Shanghai move, analysts said.
"I would not be surprised if ICBC finally exercises an overallotment option
in Hong Kong," said Francis Lun, General Manager of Fulbright Securities.
"People are frenzied about ICBC' public offering and they believe that they
can definitely make money from ICBC's share selling," Lun said. "Given ICBC's
IPO size and the market's overwhelming reaction to its institutional
subscription, we expected an overallotment to occur before ICBC formally opened
its retail tranche for the public subscription last Monday," said Philip
Securities's analyst Charis Wong, "now it looks that it is very likely to happen
soon."
ICBC set the price of its Shanghai portion of the IPO at 3.12 yuan per share
and the Hong Kong offer at HK$3.07 each, at the top end of its indicated price
range, it said in a statement issued yesterday jointly with its lead
underwriters and published in official financial newspapers.
The Shanghai overallotment means the bank will raise a record 46.644 billion
yuan (US$5.9 billion) in its Shanghai A-share issue, according to Reuters
calculations, surpassing the current domestic record of 20 billion yuan held by
Bank of China's Shanghai IPO listed in July.
A similar move would bring its Hong Kong offer to 40.7 billion H-shares,
raising HK$125 billion (US$16 billion), bringing the total funds raised through
the IPO to US$21.9 billion, according to Reuters calculations.
That would surpass Japan's NTT Mobile Communications, which raised the
world's largest US$18.4 billion in 1998.
"In line with the situation of subscription and the issuer's demand for
funds, we decided to exercise an overallotment option, bringing the total of the
(Shanghai A-share) issue to 14.95 billion shares," ICBC said in the statement.
Its Shanghai option accounts for about a quarter of its IPO, with Hong Kong
having the lion's share. The IPO will account for 16.7 per cent of ICBC's
expanded capital after the offer, if both overallotment options are exercised.
The mainland revised its regulations governing stock issues in September,
allowing overallotment, also known as a greenshoe option, for the first time,
although such options have been a common practice in Hong Kong and other mature
stock markets.
ICBC's Shanghai retail portion was around 30 times oversubscribed, while the
institutional portion was 13 times oversubscribed, the statement indicated.
A total of 781 billion yuan in subscription funds have been frozen due to the
subscription, exceeding the former record of 660 billion yuan held by Bank of
China.
With a strong operating network comprising as many as 21,000 operating points
across China, ICBC notched up a net earning of 25.4 billion yuan in the first
half of 2006. It aims to generate a net earning of at least 47.2 billion yuan by
the end of the year.
