Lenovo withdraws Shanghai mega IPO, in a setback for the fundraising centre stage of China’s technology champions

  • The Shanghai Stock Exchange (SSE), which manages the Star Market, said it has ceased the review process for Lenovo’s application to sell shares
  • Lenovo, already listed in New York and Hong Kong, had planned to raise up to HK$13.6 billion (US$1.8 billion) in Shanghai

Lenovo Group has pulled its blockbuster stock-sale application from Shanghai’s Star Market, making the withdrawal merely eight days after it was accepted by an exchange that casts itself as the centre stage for China’s technology champions.

The Shanghai Stock Exchange (SSE), which manages the Star Market, said it has ceased the review process for Lenovo’s application to sell shares, according to an announcement late on Friday. The Beijing-based company, the world’s largest maker of personal computers, asked to withdraw the application on October 8 along with its listing sponsor China International Capital Corporation (CICC), according to the statement.

The withdrawal is the second-biggest IPO cancellation in Shanghai since Ant Group, the affiliate of this newspaper’s owner Alibaba Group Holding, had its US$39.7 billion dual listing foiled in November 2020. Lenovo, whose shares are already listed on the New York and Hong Kong exchanges, had planned to raise up to HK$13.6 billion (US$1.8 billion) in Shanghai, making it the first Chinese company to sell so-called Chinese Depositary Receipts (CDRs) on China’s financial market place for technology companies.

The surprise cancellation is a setback for the Star Market’s push to attract offshore listed Chinese companies to list at home, part of the Chinese President Xi Jinping’s edict for domestic investors to enjoy the capital growth of the nation’s technology champions. Lenovo, founded by the technology entrepreneur Liu Chuanzhi nearly four decades ago, owns the IBM ThinkPad line of laptops and personal computers, as well as the Motorola line of smartphones.

Liu Chuanzhi, founder and chairman of Legend Holdings, later renamed Lenovo, during an interview in Hong Kong

Lenovo is the first so-called Red Chip company to raise funds in Shanghai through CDRs. Red Chips, listed in Hong Kong, are offshore-incorporated companies whose assets and businesses are in China.

Depositary receipts are certificates issued by banks that represent shares issued by companies, typically by those domiciled outside the market where they are traded. The CDR is China’s attempt to broaden and deepen the nation’s onshore capital market in Shanghai and Shenzhen. Lenovo had applied to sell 1.3 billion CDRs, each receipt representing one Lenovo share.

The folding mechanism of the Lenovo ThinkPad X1 Fold, the world’s first laptop with a foldable single screen. There is no noticeable crease in the folding part of the screen. The hinge is sturdy and apparently has passed US military grade rugged testing.

Liu, who turned 77 in April, is the father of Jean Liu Qing, one of the founders of China’s dominant ride-hailing company Didi-Chuxing.

Didi, with 90 per cent share of China’s ride-hailing market, forced its way to a US$4.4 billion IPO in New York in late June against the injunctions of Chinese regulatory officials, an act that has been characterised as “a deliberate act of deceit.” The younger Liu has no involvement or any connection to Lenovo’s operations. Spokespeople at Lenovo and CICC didn’t reply to requests for comments by South China Morning Post.

Lenovo’s Motorola Razr 5G smartphone, featuring a foldable screen, a modern reprisal of the iconic Razr design

Lenovo, which makes nearly one in every four computers sold throughout the world, is shifting from a maker of computer hardware and electronic gadgets into a business that focuses on computer software and enterprise services.

Its first-quarter profit surged almost 120 per cent to US$466 million as revenue rose 27 per cent to US$16.9 billion from last year. The company’s net income margin hit its highest level for several years at 2.8 per cent. It has a registered office in Hong Kong, and has 63,000 employees on staff across 180 worldwide markets.

Lenovo’s shares have risen 2.7 per cent in Hong since the SSE accepted its CDR sale plan on September 30. It jumped by 9.5 per cent on January 13 to a five-year-high of HK$8.83 after announcing its CDR plan.

Author: Iris Ouyang, SCMP

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