Chinese IPOs underpriced by up to $200bn due to valuation limits | Financial Times
Research underscores struggle for competitive listings in country’s vast equity market
✒ China’s “IPO pop” is returning. The average market-adjusted cumulative return during first 240 trading days is significantly higher than the past 1.5 decades since 2014.
The China Securities Regulatory Commission in 2014 in effect imposed a limit that meant most companies could only list their stock at a maximum value of 23 times earnings per share.
Before such limit was in place, an auction-based system was adopted for pricing IPOs (more akin those in New York, Hong Kong and London), making it less likely to have big price rises on the first day of trading.