Why China Molybdenum's Shanghai IPO Made A Big Splash
China Molybdenum Company (HKEX:3993,SSE:603993) surprised analysts when it soared from its initial price of 3 yuan to as high as 9.48 yuan on October 9, the stock's first day of trading on the Shanghai Stock Exchange. The shares have since moved lower to today's level of around 8.76 yuan.
The Shanghai IPO is a secondary stock issue for China Moly. Its main listing on the Hong Kong Stock Exchange barely budged in comparison, rising just 3.4 percent during the day.
China Moly's big jump triggered a wave of speculation from analysts
The company aimed to raise US$579 million from its IPO to finance a new alloy project and increase its overall output. China Moly is China's largest producer of molybdenum, and the world's fourth-biggest. It is also a major tungsten producer.However, the company cut its fundraising target by over 83 percent, to about US$93.5 million, after the China Securities Regulatory Commission (CSRC) asked it to lower its IPO price from between 6.49 yuan and 8.48 yuan to 3 yuan. The company also cut the number of shares it floated by 63 percent, to 200 million, due to a recent surplus of new issues coming on the market. In a CNBC article, Dongxing Securities analyst Zhang Fang said the sharp jump in the share price “is the result of excessive pessimistic mood when the IPO price was set. There is now renewed speculative interest in relatively small IPOs.” Yingda Securities analyst Liu Li agreed. “This was a very rare and heavy intervention by the regulators,” he told Reuters. “There was concern by the regulator that the offering would weigh on an already sluggish market. Today's market response shows that the offering was priced too cheaply.”
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV