Postal Savings Bank of China said shareholders have opted out of the offered stocks of their Shanghai IPO - a notable move that reflects growing concerns regarding issues in the country's banking system.
Lingering worries about China's banking sector's safety have risen this year after regulators took control of Baoshang Bank, headquartered in Inner Mongolia, in May, citing significant credit risks.
This was accompanied by the bailout made by state and local governments of four other national borrowing entities, hurting stakeholder confidence towards the market.
Over-subscription
China's largest bank in terms of several branches nationwide seeks up to 28.45 billion yuan ($4 billion) in the first part of the 79-fold over-subscribed share sale - a low level as China's mainland share offerings are often over-subscribed thousands of times.
An over-allotment option of 15 percent of the stock, which has to be exercised within 30 days of the sale, will raise the funds to $4.7 billion. The PSBC disclosed in a statement Tuesday that almost all of those who decided they would refuse an allocated share offer were retail investors.
Compared to other IPO markets, in mainland China shareholders are not obligated to pay before getting their allocation. Underwriters of the stock sale will pick up the unsold shares.
Dai Zhifeng, an analyst at Zhongtai Securities Co, said he viewed the issue as one of a broader shareholder alert of bank stocks rather than a representation of the financial condition of PSBC per se.
He noted that some of the banks recently listed are trading below their issue price. Since its Nov. 27 debut in Shanghai, Zheshang Bank Co Ltd has fallen 8 percent.
Under stress
According to Zhifeng, although the banks are under pressure, after the allotment option takes effect, the stock price of PSBC will stabilize,
PSBC Chairman Zhang Jinliang promised investors at an online roadshow last week that underwriters would take shares in the over-allotment option if the bank's shares were adjusted below their issue price in their first four weeks of trading.
The option is thus a measure that would significantly reduce the initial volatility of the shares and stabilize the current price, Jinliang said. PSBC is only the fourth largest company in China's A-Share market to include a "greenshoe" option.
At the behest of the country's central bank, it executes the listing which requires state-owned lenders to be more open to the capital markets' technicalities and rigors.
