The People’s Insurance Company of China (PICC) is getting ready for one of the larger IPO‘s this year in Hong Kong. Reuters’ Breakingviews columnist Wei Gu describes how it used a typical Hong Kong style to build support for its IPO.
The insurer’s 17 investment banks have helped it sign up 17 “cornerstone” backers in advance of its $3.6 billion Hong Kong offering. Though they’re hardly big-name value investors, they improve the likelihood of getting the deal done.
Signing up cornerstone investors ahead of an IPO is largely a Hong Kong phenomenon. The original idea was that big-name investors would put a valuation on the stock in return for a guaranteed allocation. A vote of confidence from local tycoons and sovereign wealth funds would help to boost confidence among smaller shareholders.
In recent years, cornerstone investors have tended to take between 10 percent and 20 percent of the shares on offer…
Some investors are buying for strategic reasons. Seven of PICC’s 17 investors are fellow insurance companies, including American International Group, insurers from France, Japan and Russia, and three domestic rivals such as China Life. These buyers tend to have a relationship with the issuer, or are hoping to build one. AIG, which is investing $500 million, simultaneously signed a deal with PICC to sell life insurance in China. That gives the U.S insurer, which was forced to offload its Asian arm in the wake of the crisis, a new foothold in the world’s most populous market.
Later today the China Weekly Hangout is about the future of nuclear power in China. You can register at our event page here. (Two weeks earlier we missed the change in daylight saving time in the US and had to cancel.) First part will focus on the resumption of building nuclear power stations, the second part of the chances NIMBY protests can derail this ambitious program. Planned participants: Richard Brubaker and Chris Brown.
Last month the China Weekly Hangout discussed energy security with Terry Cooke, Richard Brubaker and Fons Tuinstra, focusing on solar and wind power.
- Weibo-Alibaba teaming up is a good idea – Wei Gu (chinaspeakersbureau.info)
- Old hands take over finance regulators – Wei Gu (chinaspeakersbureau.info)
- China IPO’s: a tough call – Wei Gu (chinaspeakersbureau.info)
- China’s Amazon is heading for trouble – Wei Gu (chinaherald.net)