BEIJING, Sept. 11 (Xinhua) – China's National Equities Exchange and Quotations (NEEQ), better known as the "new third board", will deliberate on stock listing applications of the second batch of firms on its best performing companies tier NEEQ Select next Monday, reported Xinhua-run Shanghai Securities News on Friday.
The NEEQ listing committee will convene a meeting on next Monday to consider the stock listing applications from Shandong Wantong Hydraulic Co., Ltd. (Wantong Hydraulic) and Shandong Digihuman Technology Co., Inc. (Digihuman), both of which became market focus by introducing the "green shoe option", an over-allotment option, in their public stock listing.
Wantong Hydraulic, one of the major providers of oil cylinder for dumper, machinery and equipment in China, intended to raise 140 million yuan via no more than 17 million public stock issues at a price of not lower than 8.00 yuan per share.
The company planned to use the proceeds to finance its heavy vehicle hydro-pneumatic spring production program with an annual output of 20,000 units, high-pressure cylinder for excavators with an annual output of 7,000 units and hydraulic technology research center project as well and boost working capital.
Digihuman is a software developing firm specialized in digital medicine sector. It planned to sell no more than eight million stocks at a price of no less than 12.50 yuan per share to raise 100 million yuan. The company said the proceeds would go to its high-definition digital human research and industrialization program and digihuman cloud program to strengthen sector competitiveness.
In spite of considering using the "green shoe option" in their stock issuance applications, Wantong Hydraulic and Digihuman might not adopt the choice as in the first batch of 32 firms filing applications for listing on the NEEQ Select and three mentioned the "green shoe option" but did not use the option at all.
"Green shoe option" is rarely applied in China's A-share market but frequently used in the stock markets in Hong Kong and the United States. Statistics showed that 44 percent of initial public offering (IPO) deals completed in Hong Kong from 2017 to the first quarter of 2019 announced introduction of the mechanism.
Market watchers said the "green shoe option" works as a price stabilizer mainly in situations when market sentiment is weak and results of IPOs are hard to predict in a bid to prevent overvalued IPOs and increase investor confidence.
Currently, if the "green shoe option"-included stock listing on NEEQ Select suffers a fall on debut due to the weak market sentiment, it is likely that part of the funds from the secondary market will cushion the fall.
However, a research report from Essence Securities said the "green shoe option" do have certain effects on stabilizing the prices of new stocks after their public listing, but due to the limited quota for subscription by securities brokers and uncertain market reaction, its effects may be limited and performances of new stocks are more up to the reasonability of their pricings. (Edited by Duan Jing with Xinhua Silk Road, duanjing@xinhua.org)
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