China Merchants Securities Co. has cut the size of its planned Hong Kong initial public offering by more than half, the Wall Street Journal reported, citing people familiar with the matter.
Poor market conditions and lower valuations of comparable firms in the sector prompted the firm, which is a member of the China Merchants Group, to scale down its plans, the report said.
The Shenzhen-based brokerage, which submitted an IPO application last Friday, is said to be looking to raise less than half of the previously reported US$4-5 billion.
In June last year, the Journal reported that Merchants Securities was planning to raise up to US$5 billion in a Hong Kong IPO.
But a Chinese stock market crash last summer, which led to a steep drop in the valuations of mainland brokerages, forced the company to rethink its plans, sources told the paper.
Rivals Huatai Securities and GF Securities both raised more than they expected in Hong Kong IPOs when the market was booming in the first half of 2015. But both the firms are now trading below their IPO prices.
China Merchants plans to use the IPO proceeds to develop its brokerage and wealth-management business, and also to inject additional capital into its futures subsidiary, China Merchants Futures.
In the first quarter of 2016, the brokerage’s net profit is said to have slid more than 60 percent compared to the same period last year.
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