China’s Ping An May Scale Back Massive Share Offer

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China life insurer Ping An Insurance, under pressure from regulators, indicated it might scale back or postpone a massive $17 billion share issue, sending its shares sharply higher on Tuesday.

The China Securities Regulatory Commission (CSRC), in a fresh bid to support a flagging stock market that has dropped more than 30 percent from October’s peak, has publicly warned Chinese firms against making big share issues that could hurt the market.

“Our company has noticed the comments made by the CSRC spokesman … The company will prudently consider the timing and size of the fund-raising as well as market situation,” China’s second-biggest life insurer said in a statement quoted by official media.

Ping An announced last month a plan to issue shares and convertible bonds that could raise some 120 billion yuan ($16.8 billion) in one of the world’s largest equity refinancings.

The company did not elaborate further on its plans, but analysts said the CSRC statement made a drastic scaling back or postponement of the fund-raising almost inevitable. Ping An stock has plunged in the past month out of concern the market could not absorb the huge offer.

The company has scheduled a shareholders’ meeting on March 5 to vote on the plan, and many fund managers already expect it to be rejected.

“Many institutional investors are unhappy with Ping An’s plan as they see returns on their investments in the firm’s shares eroding. Those who want to cash in their Ping An shares will surely vote against the proposal,” said Wang Xiaogang, an insurance industry analyst at Orient Securities.

Even if it wins shareholder approval, Ping An’s plan may not be approved by the CRSC, which warned on Monday it would “strictly” examine fund-raising applications to prevent companies from “maliciously seizing” money from the stock market.

Ping An shares climbed 3.24 percent to 67.50 yuan in a weak overall market on Tuesday in anticipation that the fund-raising plan would be cut. The shares are down 31 percent since the plan was announced in mid-January.

REBOUND AFTER CUT?
Some analysts said the shares could rebound by 20 percent or more if Ping An cut its equity offer by roughly half and delayed it by a couple of months. A cut in the issue size will prompt a refocus on the company’s growth prospects, analysts said. Net profit soared 146 percent to 11.68 billion yuan in the first nine months of last year.

“If Ping An delays its offer for roughly two months, and cuts its offer considerably in line with market conditions, its A shares should rebound to 98 yuan, where they were just before its fund-raising announcement,” Wang said.

Ping An has said it needs the money to boost its capital and make unspecified investments at home and abroad, but many analysts do not think it needs as much as 120 billion yuan and view its fund-raising plan simply as an opportunistic attempt to take advantage of a high share price.

The stock remains 44 percent higher than the close on its first day of trade in Shanghai last March.

By Samuel Shen and Lu Jianxin

Ed. note $1=7.15 yuan