Agricultural Bank plans mid-July IPO

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Agricultural Bank of China's (ABC) scheduled mega-listing in mid-July could serve as a catalyst for a rebound in banking shares and the overall stock market.

ABC, which aims to be listed in Shanghai, is the second company in the history of the A-share market to exercise a "green shoe" option, following Industrial and Commercial Bank of China (ICBC) in 2006.

ABC, which has priced its A-share offering in the range of 2.52 to 2.68 yuan, is planning to issue about 22.235 billion shares in Shanghai, but the total shares issued would amount to 25.571 billion if the "green shoe" option is fully exercised, according to its IPO prospectus.

Under the green shoe arrangement, the lead underwriter of A-share sales is entitled to over-place no more than 15 percent of the initial issuance.

The lead underwriters, which are entitled to exercise the green shoe option within 30 days following a listing, can purchase A shares at a price no more than the issuance price.

The move is aimed to maintain the lender's share price in the initial listing period and engineer a smooth transition for the share price from the primary market to the secondary market.

The exercise is also expected to greatly lower investor risks over the period for retail investors who subscribe to its online tranche.

ABC said earlier that up to 40 percent of the Shanghai portion of the offering, including the green shoe option, will be placed with strategic investors, meaning that about 10 billion shares already have subscribers.

Fifty percent of the shares placed with strategic investors will have a lockup period of 12 months. The other half will have a 18-month lockup, the bank said.

"They will not have any impact on the bank's share prices as their expiration date is still far away," said Pan Gongsheng, ABC's vice president.

Deducting the shares placed with the strategic investors, ABC is planning to sell 15 billion shares to both institutional and retail investors.

The share price of any big bank on its listing debut day has never dropped below the IPO price - all have risen to varying degrees and triggered stock market rallies.

ICBC, the world's biggest bank by market value, priced its A-share IPO at 3.12 yuan and closed at 3.28 yuan on its first day of trading in Shanghai on October 27, 2006.

Its share prices later declined to as low as 3.25 yuan before rebounding to close the year at 6.36 yuan, or up 103.8 percent from its IPO price.

ABC, with similar asset scale as ICBC and facing similar market sentiment, is expected to pull off a sound IPO and deliver a good performance.

And its listing, coupled with the mid-year earnings reporting season, is also likely to serve as a catalyst to lead banking shares and the stock market as whole from its lows and engineer a rebound in July.

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