China rebukes top investment bank over Lenovo's botched listing

[BEIJING] China's securities regulator rebuked China International Capital Corp (CICC), saying the country's top investment bank has failed in due diligence on Lenovo Group's recent application for a US$1.6 billion stock listing in Shanghai.

CICC, as the sponsor for the listing, was found to mainly rely on the explanatory documents provided by the issuer to draw conclusive opinions on the firm, according to a notice issued by the China Securities Regulatory Commission (CSRC) late Wednesday (Dec 29).

The CSRC summoned 5 CICC bankers involved in the listing for regulatory review on Dec 23, after finding that they have failed to produce sufficient and accurate information to show Lenovo is qualified for a listing on the country's Nasdaq-style trading board.

The staff, including Wang Sheng, head of CICC's investment banking division, would have the right to appeal to local courts on the regulatory decision, according to the notice, without elaborating.

In separate notices released late Wednesday, CSRC also criticised Wanlian Securities and Sinolink Securities for their failure in due diligence on other initial public offerings.

CICC didn't immediately respond to request seeking comment. The investment bank ranked No 2 in underwriting Chinese companies' IPOs this year, according to data compiled by Bloomberg. Its Shanghai and Hong Kong-listed shares gained more than 1 per cent in early trading Thursday (Dec 30).

Lenovo, the world's largest personal computer maker, withdrew the plan to list on Shanghai's Star market in October, just days after its application was accepted by regulators. That surprise move led to a plunge in prices of its Hong Kong-listed shares. The company has said the validity of the information in its prospectus may have lapsed during the vetting process.

China's securities regulator toughened listing requirements for first-time share sales on the Star market earlier this year in areas such as a firm's research and development capability, patents, revenue growth rate and capacity to innovate.

The move underscores stepped-up efforts to weed out a bevy of sub-par firms that have rushed to raise funds to take advantage of lax oversight and high valuations, with many chasing strong investor appetite for technology-related listings.

Lenovo had sought to raise about 10 billion yuan (S$2.1 billion) from the Shanghai share sale to fund artificial intelligence and cloud services projects as well as industrial investments.

BLOOMBERG