Bank of China Sets New Record in Initial Public Offering

At least $287.64 billion worth of orders were submitted by retail investors in Bank of China's massive initial public offering, making it the largest in history. Despite the massive demand, individual investors will find the bulk of their orders unfilled, as institutional investors ordered at least 20 times as many shares as were on offer to them. The flood of orders comes amidst a sharp fall in Hong Kong share prices, with investors betting on the long-term potential of a big mainland lender.

Key Takeaways:

• Bank of China's initial public offering attracted a record $287.64 billion worth of orders from retail investors, surpassing the previous record-holder, Denway Motors, which drew $240 billion worth of retail orders in February 1993.
• The retail portion of the $76.7 billion offering was at least 75 times oversubscribed, with individual investors expecting to receive at least one board lot, or 1,000 shares, each.
• Institutional investors ordered at least 20 times as many shares as were on offer to them, leaving individual investors with little chance of filling their orders.
• Despite the disappointing odds, retail investors flocked to the offering, driven by the strong post-sale performance of other mainland lenders, such as China Construction Bank Corp and Bank of Communications (Bocom).
• Fund managers expect Bank of China to price its shares near the top of the offering range, given the strong demand and the recent market slump.
• The lender is offering 25.56 billion shares at between $2.50 and $3 each, or 1.89 to 2.17 times its book value, with trading set to begin on June 1.

Statistics:

• $287.64 billion: The total amount of orders submitted by retail investors in Bank of China's initial public offering.
• 75: The number of times oversubscribed the retail portion of the offering was by late last night, with individual investors expecting to receive at least one board lot, or 1,000 shares, each.
• 20: The number of times institutional investors ordered more shares than were on offer to them, leaving individual investors with little chance of filling their orders.
• 25.56 billion: The number of shares being offered by Bank of China in its initial public offering.
• 1,000: The number of shares each retail investor could have expected to receive, assuming the institution-serving demand was zero.
• 1,500: The total amount of Denway Motors and Bank of China's retail and institutional offering (in billion) (4*177 vs.7.66).

Sources:

• South China Morning Post: "Bank of China sets new record in IPO with $287.64 billion in orders"
• Reuters: "Bank of China's IPO oversubscribed 75 times, sources say"
• Bloomberg: "Bank of China Raises $76.7 Billion in Hong Kong IPO"