Aosaikang postpones its IPO on ChiNext

Chinese drug maker Jiangsu Aosaikang Pharmaceutical Co Ltd became the first to delay its initial public offering after authorities resumed IPO approval after a 13-month freeze. [Photo / dfic.cn]

Chinese drug maker Jiangsu Aosaikang Pharmaceutical Co Ltd became the first to delay its initial public offering after authorities resumed IPO approval after a 13-month freeze.

The company said in an exchange filing on Friday that it will postpone its IPO until a more appropriate time because "the proposed issuance was too big."

Analysts said the IPO price of Aosaikang is too high. The average PE ratio of pharmaceutical companies listed on Shenzhen's Nasdaq-style ChiNext board, where Aosaikang plans to go public, is roughly 55.31, according to the state-run Shanghai Securities Journal.

Aosaikang announced on Thursday that it plans to issue 55,466,000 shares at 72.99 yuan ($12) per share on its IPO, a 67 times price-to-earnings ratio. And 43.6 million shares to be issued are transferred from the holdings of former shareholders.

"A major purpose of the IPO reform is to prevent companies from cashing out by going public, and the authority has made its stance quite clear against high IPO price and blunt reduction of old shares from original shareholders, but it seems companies are still trying to avoid it," said Simon Yue, an analyst at a Shanghai-based private equity investment company.

"The delay should be ordered by the China Securities Regulatory Commission. Their IPO price is too high, and the reduction of old shares is too aggressive, CSRC won't let it set a bad example as more than 20 companies are about to take subscriptions in the next two weeks," said Zhou Yi, an independent financial commentator.

China halted IPO approval in November 2012, in a bid to clean up fraud conduct, curb over-priced stocks and boost investor confidence. However, even without the supply of new stocks, Chinese shares fell last year. The benchmark Shanghai Composite Index dropped by 7 percent, one of the biggest declines among major Asian indexes in 2013.