Fubon Financial Holding Co (富邦金控) shares took a beating yesterday after the company priced its global depositary receipts (GDRs) at a more than 6 percent discount, dealers said.
Foreign institutional investors were thought to be behind the sell-off, scrambling to cut their positions in the stock to take advantage of the discount on GDRs, they said.
The selling could be short-lived, though, because Fubon Financial remains the most profitable listed financial holding company in Taiwan and investors still believe its aggressive moves into the Chinese market will further strengthen its bottom line, they added.
Fubon Financial shares fell 5.12 percent to close at NT$37.05. The TAIEX closed 1.30 percent down at 7,911.42.
In a statement, Fubon Financial said it would issue a total of 69.84 million GDRs at a price of US$12.17, equal to NT$36.51 per common share. The price represented a 6.5 percent discount on the stock’s closing price on Tuesday.
Hua Nan Securities (華南永昌證券) analyst Henry Miao (苗台生) said that Fubon decided to offer the steep discount to secure the support of foreign investors because the GDR offering is so big.
The funds are to be largely used to finance the company’s acquisition of a stake in China-based First Sino Bank (華一銀行), but they are also to be used to retire short-term debt and improve Fubon’s financial structure.
In late December last year, Fubon Financial announced that it and its wholly owned banking subsidiary Taipei Fubon Commercial Bank (台北富邦銀行) would acquire a 29 percent stake and a 51 percent stake respectively in First Sino Bank.
The acquisition is costing Fubon Financial 5.65 billion yuan (US$911 million), or about NT$26.84 billion.
“Fubon Financial is one of the local financial institutions moving most aggressively into the China market. I expect the acquisition will help it quicken the pace at which it penetrates the market, especially the Chinese yuan deposit and lending businesses,” Miao said.
Fubon Financial said First Sino Bank currently runs 10 branches and four sub-branches in cities located in the Yangtze River Delta, the Pearl River Delta and the Tianjin Bohai Economic Rim.
“I expect the downward pressure on the stock will be short-lived, as many investors have faith in Fubon Financial’s profitability,” Miao said.
In the first five months of this year, Fubon Financial posted earnings per share of NT$1.69, the highest among the nation’s 15 listed financial holding companies. Last year, it ranked as the most profitable financial holding company for the fourth consecutive year.