(CapitalWatch, Oct. 13, Hong Kong) Lenovo Group Ltd. (HKEX: 0992; OTC: LNVGY) has lost 19% of its market value over the past five days after the Chinese PC giant withdrew on its STAR Market listing plan amid the government crackdown on the tech sector.
The world's top manufacturer of affordable personal computers backpedaled from raising 10 billion yuan ($1.6 billion) in its Mainland offering, saying in a statement over the weekend that its regulatory filings may have lost some validity.
Just days after Lenovo said it received the green light, the Stock Exchange's Science and Technology Innovation Board surprised with a public statement saying the company has yet to meet certain conditions before the approval is finalized, The Register reported. Lenovo followed up with a withdrawal announcement, attributing the withdrawal to the possible lapse in the financials provided in the prospectus, as well as "the relevant capital market conditions such as the latest circumstances in connection with the listing."
Lenovo added that its business operates as usual and the "withdrawal of the application is not expected to give rise to any adverse impact on the financial positions."
It was January when Lenovo made its Shanghai listing plan public and said it filed with the Stock Exchange of Hong Kong to issue Chinese depositary receipts (CDRs) in a trend-setting move. As The South China Morning Post reported at the time, the plan was 99% backed by Lenovo investors.
Now, some investors are dissatisfied, as the fundraising would have helped the company reduce its debt, as well as boost AI, cloud, and industrial improvement. As a result, Lenovo's Hong Kong stock plunged sharply this week, losing the significant gains it enjoyed since early 2021.
A year ago, shares in Lenovo traded near HK$5 apiece while its dual listing plan had doubled the value. On Tuesday, prior to the Hong Kong market's closure on a typhoon alert, Lenovo ended at HK$7.53 a share. In New York, the OTC value of Lenovo fell to $21.50 Wednesday after peaking at $35 a share on its listing approval last week.
It is unclear what conditions Lenovo has to meet with Shanghai's board and whether it will get back on track toward a home listing. If not, the company may seek fundraising alternatives to deleverage that could dilute the existing investors' holdings, said United First Partners' Justin Tang, as quoted by Bloomberg.
Some market surveyors compare Lenovo's IPO cancellation to the case of Alibaba's Ant Group IPO in November 2020. However, Lenovo's business does not have the scale of influence on China's public held by Jack Ma's mobile wallet and fintech services company that is now ripped apart by the regulators. It is less likely that China sees Lenovo similarly threatening than that its filings show a lapse.
Earlier, the Shanghai Stock Exchange blocked the IPO of China National Chemical Corp.'s seed and fertilizer unit, Syngenta Group, pending updated earnings information. The company, which expects to raise a massive 65 billion yuan ($10 billion) in the deal, said on Monday that it has provided the documents.