China's Brokers combine in float path

China's Brokers combine in float path
Last Updated(Beijing Time):2007-06-07 13:55

China's Everbright Securities Co and Orient Securities Co, which are both seeking initial public offerings, may become the underwriters for each other's listings as early as next year, industry sources said yesterday.

The two Shanghai-based brokers have received government support to pursue public stock sales and each expects to boost revenue via arranging the other's listing, according to people familiar with the matter.

"The duo both wish to launch IPOs as soon as possible and they are now in talks to underwrite each other's listings," said a person with direct knowledge of the situation. "Preparatory work has started but no final agreement has yet been fixed."

Expansion plans

Officials at Everbright Securities and Orient Securities were not available for comment yesterday.

Everbright Securities said early this year that it was seeking to pursue an IPO to raise funds for expansion. The broker said last month it will revise 2004 earnings to comply with regulatory requirements that it show three straight years of profit before selling shares publicly.

Orient Securities, controlled by a raft of Shanghai-based state-owned firms, charted revenue of 1.86 billion yuan last year, 4.8 times that of 2005, according to its 2006 annual report.

The brokerage house had earlier planned to buy control in a mainland-listed company for a back-door listing but now prefers an IPO, which is likely to help it collect more funds, the sources said.

"Regulators tend to favor brokers' plans to launch IPOs because they are easier to manage than back-door issuance and have less possibility to incur insider dealings," said a securities executive close to the watchdog. "That's why a growing number of brokerages are now turning to IPOs."

Chinese stock authorities said this month that they will punish companies and people involved in the back-door issue of GF Securities Co after finding improper disclosures and insider trading during the deal.

GF Securities proposed in September to take over Shenzhen-listed Yan Bian Highway Construction Co via a stock swap which is set to become the first mainland broker to go public in four years. The transaction has yet to gain regulatory approval.