Hon Hai Precision Industry Co (鴻海精密) shares yesterday surged after its Internet-focused subsidiary — Foxconn Industrial Internet Co (FII, 富士康工業互聯網) — secured approval from Chinese authorities a day earlier to launch an initial public offering (IPO), dealers said.
FII on Thursday won approval from the China Securities Regulatory Commission to list on the Shanghai Stock Exchange about a month after it published a prospectus outlining its plans to spend 27.3 billion yuan (US$4 billion) on an expansion into cutting-edge technology.
The speed of the regulatory approval underscores the anticipation around the Taiwanese company that embodies billionaire Terry Gou’s (郭台銘) ambition of moving beyond assembling PCs and smartphones for the world’s top electronic brands.
“The size of the IPO should be pretty close to what’s disclosed in the prospectus,” Shanghai-based Capital Securities Corp (群益證券) analyst Amy Lin (林靜華) said.
Lin forecast that the shares could command a share-price multiple of 15 to 19 times earnings on their debut.
“The average price to earnings ratio of shares listed in Shanghai is about 100 percent higher than shares traded in Taipei on average,” Taipei-based Mega International Investment Services Corp (兆豐國際投信) analyst Alex Huang (黃國偉) said. “The IPO will benefit not only FII, but also its parent company, which will receive fat proceeds from the listing.”
Hon Hai, which makes smartphones, cloud computing equipment and robots, wants the 27 billion yuan to fund projects such as artificial intelligence and fifth-generation wireless technologies, positioning the company centrally in the technology supply chain.
Hon Hai is expected to retain an 85 percent stake in FII.
Hon Hai shares climbed 2.8 percent to close at NT$91.90 after hitting an intraday high of NT$92.30, the company’s biggest gain since Jan. 19.
The debut, expected at the end of this month according to Chinese media, comes amid a Chinese push to attract Taiwanese capital and Taiwanese lawmakers have expressed concern that other Taiwanese companies could be lured by the speedy approval of FII’s application to list in Shanghai.
Democratic Progressive Party (DPP) caucus whip Ker Chien-ming (柯建銘) said that the government should take steps to retain the nation’s most important enterprises.
Chinese Nationalist Party (KMT) Legislator William Tseng (曾銘宗) said the nation’s economy would suffer as a result of a brain drain if an increasing number of Taiwanese firms follow in Hon Hai’s footsteps.
The debut also dovetails with an effort to bring technology listings back to China after Chinese companies have long pursued the prestige and capital associated with marquee overseas debuts.
Chinese technology businesses from Alibaba Group Holding Ltd (阿里巴巴) to Tencent Holdings Ltd (騰訊) have outstripped their old-economy peers to become the nation’s largest firms, but virtually none of them are traded domestically.
“It’s hard to estimate the actual IPO size of FII, but it should be big,” Shanghai-based Hengsheng Asset Management Co (恆盛資產管理) fund manager Dai Ming (戴明) said.
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