Foxconn gets Shanghai’s nod in record time to raise US$4.3 billion in initial public offer
Foxconn Industrial Internet, a unit of the world’s biggest contract manufacturer whose products include Apple’s iPhones, was put on the fast track for securing the nod by China’s securities regulator to raise capital through an initial public offering.
The unit of Taiwan’s Hon Hai Precision Industry has been approved by the China Securities Regulatory Commission to raise 27 billion yuan (US$4.3 billion) in an IPO, according to a notice by the regulator. Foxconn filed its stock-sale application on February 1.
The offer would be China’s biggest stock sale since the 30.6 billion yuan IPO by Guotai Junan Securities three years ago, putting it on path to become the largest technology company by market value on the mainland, with 500 billion yuan in market capitalisation expected after the listing, analysts said.
“Foxconn will be the new darling of Chinese investors since it is supported by the government,” said Ivan Li, an asset manager with hedge fund group Loyal Wealth Management.
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The Foxconn unit intends to offer about 1.8 billion shares, or 10 per cent of its capital, using the proceeds from its IPO to fund eight new projects including cloud computing, building a data centre, 5G and the Internet of Things (IoT) projects and expansions into so-called intelligent manufacturing, according to its stock sale prospectus. Its net income rose 43.8 per cent last year to 15.87 billion yuan.
China’s securities watchdog regulates the number of companies tapping the financial markets by adjusting the pace of approvals, with some applicants having to wait up to two years to raise funds. As many as 500 companies are in the queue, waiting for the securities regulator to vet their listing applications.
In a market where regulators have a tight control on timing and size of IPOs, a fast track approval to raise billions yuan of capital is seen as a strong policy support to the tech firms.
The speedy approval of Foxconn’s application underscores the priority China is giving to technology companies, in the competition with Hong Kong as Asia’s hub for fund raising. Shanghai overtook Hong Kong last year in initial fund raising for the first time.
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Foxconn isn’t the only technology company that’s being courted to raise capital on the mainland. Other companies in the pipeline include China’s dominant ride-sharing company Didi-Chuxing, the country’s biggest on-demand internet service provider Meituan-Dianping, and Ant Financial Services Group, an affiliate of Alibaba Group Holdings, which owns the South China Morning Post.
Unicorns, or companies exceeding US$1 billion in valuation, “have all kinds of support from the regulators to expand businesses,” said Yin Ran, a Shanghai-based angel investor. “Investors are expecting the authorities to implement more preferential policies to support smaller tech firms.”