IPOs: China Construction Bank hits the road
The first of China’s four largest state-owned banks, China Construction Bank, hit the road in October for its well-trailed IPO. Despite a $8 billion offering, the largest IPO globally this year, CCB eschewed a New York listing, spooked by the Sarbanes-Oxley straitjacket, opting for Hong Kong alone.
Eventually priced near the top end of an already revised price range at 1.96 times 2005 estimated book value, the CCB deal might look a bit rich, especially given uncertainties about the true value of the bank’s assets. However, the government has already recapitalized CCB to the tune of $22.5 billion in an effort to cut bad loans. That, coupled with the $5.4 billion already pledged by strategic investors Bank of America and Temasek Holdings, $1.5 billion of which was invested in the IPO, went some way to allaying investors’ fears of further loan problems, at least for the moment. Over the longer term the critical question will be whether CCB management is successful in installing commercial lending practices across CCB’s 14,500-branch network.
By the time that becomes apparent, of course, most of the IPO investors will be long gone.