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Chip foundry SMIC to finally offer USD 6.6 billion shares at home on Tuesday

Written by Song Jingli Published on 

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The company has delisted its ADSs from the NYSE.

Shanghai-based chip foundry Semiconductor Manufacturing International Corporation (SMIC)  (HKG: 0981) will offer 1.68 billion shares to strategic, institutional, and individual investors on Tuesday, according to its filing with the Shanghai Stock Exchange (SSE) on Monday.

The company has priced each share at RMB 27.46 (USD 3.9) and is thus expected to raise RMB 46.3 billion (USD 6.6 billion) via this offering. Under this price, SMIC is valued at 83.44 times its 2019 earnings. The price-to-earnings (PE) ratio of 83.44 makes SMIC more expensive than its peers listed in Taiwan and Hong Kong, according to its filing. For example, Taiwan Semiconductor Manufacturing Company (TAI: 2330) now has a PE ratio of 24.4 while Huahong Semiconductor (HKG: 1347) has one of 30.95.

SMIC generated USD 904.9 million in revenue in the first quarter of this year, up 35.3% year-on-year and made USD 64.2 million in net profits in the period, up 422.8% YoY, due to better-than-expected market demand.  The semiconductor firm has started providing its chips to China’s major phone maker Huawei.

The contract chipmaker has delisted its American depository shares from the New York Stock Exchange and applied to list on the Star Market on June 1. It took only 19 days for the Mainland securities regulators to approve SMIC’s application, making it one of the fastest companies to make its debut in the Chinese capital markets, according to information disclosed on the website of the SSE.

SMIC is one of several companies returning to the capital markets in Mainland China or Hong Kong amid Sino-US tensions.

China’s cybersecurity software developer Qihoo delisted from NYSE in July 2016 but later went public in the Chinese mainland (SHA: 601360) in 2017 via a backdoor listing on the main board of the Shanghai Stock Exchange. Beijing-based 58.com (NYSE: WUBA), China’s largest online classifieds platform, announced last month that it has entered into a go-private agreement to be fully acquired by a consortium of investors for USD 8.7 billion, raising speculation that the company is mulling a home relisting, as KrASIA reported earlier.

In addition, Alibaba (NYSE: BABA), which went public in 2014 in the US, got listed in the Hong Kong Stock Exchange in November last year, followed by NetEase (NASDAQ: NTES) and JD.com (NASDAQ: JD), which went public in Hong Kong last month.

Read more: Shanghai Star Market outperforms other Chinese exchanges in first quarter

The company has granted Haitong Securities, one of the two major underwriters, a greenshoe option to sell investors an additional 253 million shares, according to the Monday filing. If the option is fully exercised when demand for the SMIC shares proves higher than expected, SMIC will RMB 53.2 billion.

SMIC is to disclose which investors are finally allotted its shares on Wednesday. After this move, the newly issued shares are to be listed on the high-tech focused Start Market of the SSE soon, at a time when the Chinese A-share market is bullish although the company has not disclosed when the trading starts. The benchmark Shanghai Composite Index closed at 3,332.88 on Monday, up 5.71% from last Friday, marking one of the largest daily gains this year.

SMIC closed at HKD 40.1 (USD 5.2), up 20.6% compared with last Friday and way above the RMB 27.46 offering price of its new shares.

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