Corporate insights: February 2013

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Last year saw a lacklustre IPO market in Hong Kong. Listings of equity securities dropped from a peak of 106 new listings in 2010 to 50 new listings on the Main Board in 2012. Along with the decline in the number of listings, there was a noticeable increase in the number of cornerstone investments.

Cornerstone investors are investors who agree to buy a pre-agreed amount of the international placing shares on offer in an IPO. They are also known as “strategic investors”. While initially in Hong Kong, cornerstone investors were commonly the city’s tycoons, nowadays, the profile of cornerstone investors has evolved to include investment funds, state-owned corporations and other companies within the same industry. For example, in the listing of Zhengzhou Coal Mining Machinery Group Company Limited , the cornerstone investors included a subsidiary of China Huadian Corporation, a PRC state-controlled  entity, which is the controlling shareholder of Huadian Fuxin Energy Corporation Limited (which listed in Hong Kong in June), while another cornerstone investor in that listing was a company in the same industry (namely, a wholly-owned subsidiary of Inner Mongolia Yitai Group Co. Ltd., which is also the controlling shareholder of Inner Mongolia Yitai Coal Co., Ltd. which listed in Hong Kong in July)…

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