China Mobile returned to China’s A-share stock market after facing delisting from the U.S. exchanges. The company disclosed its A-share IPO results on Dec. 28. Investors relinquished as much as 756 million yuan (approx. $121 million) worth of shares, setting a new record for the abandonment of A shares. China Telecom, which was also delisted from the United States, currently has its A-share share price lower than the issue price. Analysts believe that China Telecom’s disappointing stock performance was the main reason for investors relinquishing China Mobile’s shares.
According to a China Mobile (00941.HK)’s public notice, the number of unpaid A shares online trade was over 12.91 million, translating to 743 million yuan (approx. $119 million) worth of shares, while the number of unpaid offline trade was more than 220,000 shares, corresponding to 12.7 million yuan (approx. $2.03 million). The total added up to 756 million yuan (approx. $121 million), which is higher than the 653 million yuan (approx. $100 million) previously reported from China Postal Savings Bank Co., Ltd. (601658.SH) in Dec. 2019, thereby setting a new record.
China Mobile, China Telecom (00728.HK), and China Unicom (00762.HK) are China’s top three telecom operators delisted from the New York Stock Exchange (NYSE) in 2021. The reason for the delisting can be traced back to Executive Order 13959 issued by then U.S. President Donald Trump on Nov. 12, 2020. Pursuant to the executive order, the Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury issued a letter to the NYSE on Jan. 5, 2021, clarifying that after 9:30 a.m. Eastern Standard Time on Jan. 11, 2021, U.S. persons cannot engage in certain stock transactions of these companies.
On Jan. 6, 2021, the NYSE initiated the delisting procedure for these three telecom operators. Two weeks later, China Mobile submitted a written request to the NYSE for reconsideration. The New York Stock Exchange ratified its previous decision on May 6, 2021.
Of these three telecom operators, only China Unicom (600050.SH) has long been listed on China’s A-share market.
China Mobile’s board of directors approved the proposal to issue RMB shares on May 17, 2021, and it was then approved by the China Securities Regulatory Commission on Nov. 4.
China Mobile is aiming at the largest A-share IPO in a decade, as it intended to raise 56 billion yuan (approx. $8.96 billion) in the A-share initial public offering (IPO), higher than China Telecom’s projected IPO goal of 54.4 billion yuan (approx. $8.70 billion).
Following suit with China Telecom, China Mobile’s A-share issuance adopted a Green Shoe mechanism to maintain stock price stability.
Also known as the Greenshoe Option or Over-allotment Option, the Green Shoe mechanism enables the underwriters to over-sell at the same price no more than 15 percent of the number of shares issued. With proper trading strategies, the Green Shoe can support and stabilize stock prices to a certain extent.
China Telecom returned to China’s A-share four months earlier. Despite the inclusion of the Greenshoe Option, its share price began to fall on the second day of its A-share listing, and dropped below the issue price on Sept. 24. This status continues to today.
In a recent report by China’s Economic Observer, brokerage analysts believe that China Telecom’s price drop below its issue price was one of the reasons for investors’ abandonment of China Mobile’s A-share stocks.
China Unicom (600050.SH), which has been listed on Shanghai A shares since 2002, experienced a staggering downward trend in 2021. Its stock price stood up 4.3 yuan (approx. $0.69) on Jan. 4, peaked in March at 5.4 yuan (approx. 0.85), and closed at 3.93 yuan (approx. $0.63) on Dec. 31.