(Original title: Why is Qilu Convertible Bonds Unwelcome When It Is Listed?)
News from the Financial Associated Press on December 19 (Reporter Shi Sitong)December 19 was the listing and trading day of Qilu Bank’s public offering of 8 billion convertible bonds.
Generally speaking, new shares/bonds usually have greater profit potential and room for growth, especially convertible bonds and new bonds can be said to be “stable profits without losses”, which is hailed by investors as “buy is earned”. But what is unexpected is that on the first day of listing, Qilu Convertible Bonds (N Qilu Convertible) not only failed to rise as expected, but immediately ushered in a break at the opening.
According to the data, Qilu Convertible Bonds opened at a low price of 98.01 yuan that day, then rose slightly to the highest point of the day at 98.87 yuan, and then began to fall all the way, failing to exceed the original 100 yuan face value throughout the day. As of the close, its price had fallen to 95.128 yuan, a drop of 4.87% on the day. That is to say, the investors who win the lottery will not only lose money, but will lose nearly 50 yuan for each lottery (1,000 yuan).
Regarding the rare breakout of Qilu convertible bonds this time, Wang Pengbo, chief analyst of the financial industry at Broadcom Consulting, believes that it may be mainly due to factors such as the large number of 8 billion convertible bonds and the high share conversion price. “The scale of the convertible bonds issued this time is relatively large, which may increase the pressure on future share conversions. The long time limit for interest payment, the low allocation rate of shareholders, and the high comparison between the conversion price and the current stock price may all be the reasons for the break.
8 billion huge convertible bonds
On November 25, Qilu Bank issued the “Announcement on Public Issuance of Convertible Corporate Bonds”, stating that the bank and China Securities Securities organized the implementation of this public offering of convertible corporate bonds. This time, 8 billion yuan of convertible bonds were issued. The face value is RMB 100, a total of 80 million copies, 8 million lots, issued at face value. The convertible corporate bonds issued this time are referred to as “Qilu Convertible Bonds” and the bond code is “113065”.
Among them, the convertible bonds issued this time are given priority to the original shareholders. The preferential subscription of the original shareholders is carried out through the trading system of the Shanghai Stock Exchange. The allotment is referred to as “Qilu Distribution Bond” and the allotment code is “764665”.
The remaining part following the original shareholder’s preferential allotment (including the part of the original shareholder’s waiver of the preferential allotment) will be sold to social public investors online through the Shanghai Stock Exchange trading system, and social public investors will purchase on November 29, 2022.
However, judging from the results, the shareholders of Qilu Bank’s convertible bonds did not have a high degree of approval, while the success rate of ordinary investors was relatively high. On November 30, Qilu Bank disclosed the winning results of its convertible bonds, which showed that the allocation rate of shareholders who were preferentially allotted to the original shareholders was only 43.15%; while public investors had a total of 4,548,183 lottery numbers, and each lottery number might only subscribe for 1 lot ( 1,000 yuan) Qilu Convertible Bonds, accounting for 56.85% of the total issuance, and the online lottery rate is 0.04258181%.
In this regard, Wang Pengbo, chief analyst of the financial industry at Broadcom Consulting, believes that, on the one hand, the total amount of Qilu Bank’s convertible bonds this time is too high, and its conversion price is also priced at a high level; Less is also one of the reasons.
Regarding the reason for issuing convertible bonds, Qilu Bank stated in its prospectus that all funds from convertible bonds will be used to support the development of various businesses in the future, and will be used to supplement core assets in accordance with relevant regulatory requirements following the conversion of convertible bond holders. Tier 1 capital.
“Mostly banks issue convertible bonds to replenish Tier 1 capital.” Wang Pengbo pointed out that small and medium-sized banks face greater capital pressure, and issuing convertible bonds is one of the main ways for commercial banks to replenish core Tier 1 capital. The cost of convertible bonds is lower, and the upward allotment allows institutions to obtain more funds.”
It is understood that Qilu Bank’s capital adequacy ratio indicators are lower than the overall level of commercial banks. Data show that at the end of the first half of this year, Qilu Bank’s capital adequacy ratio, tier-one capital adequacy ratio, and core tier-one capital adequacy ratio were 14.46%, 11.22%, and 9.33%, respectively, while the corresponding indicators for commercial banks in the same period were 14.87%, 12.08%, 10.52%. At the end of the third quarter of this year, the above three indicators of the bank further dropped to 14.27%, 11.10%, and 9.27%.
The only rare break of the year
Since newly-listed stocks or bonds are usually hot spots in the market, under normal circumstances, new stocks/bonds usually have greater profit potential and room for growth, so many investors are keen to launch new ones.
According to market participants, the number of IPO-listed companies has gradually increased in recent years, and new shares will often break out, posing certain risks. In contrast, the risk of new convertible bonds is relatively small, and investors are more likely to make a profit. “Generally, what you buy is what you earn.”
In fact, judging from the convertible bonds listed this year, the data show that over 140 convertible bonds listed this year have all seen increases to varying degrees, and none of them have “broken.” Make sure you don’t lose.” Among them, the convertible bond of Gonggong Pharmaceutical Co., Ltd., which was just listed a few days ago, rose as high as 57.3% on the first day of listing. Today, the Qilu convertible bond broke when it was listed, becoming the first convertible bond to break this year. It is understood that the last time a convertible bond broke on the first day of listing was the convertible bond “Zhongzhuang Zhuan 2” issued by China Construction Construction that was listed in May 2021.
From the perspective of bank convertible bonds, Qilu convertible bonds have become the first “broken” bank convertible bonds in the past four years. It is understood that in history, there have been very few bank convertible bonds that have been listed on the market. Only three bank convertible bonds, Jiangyin Convertible Bonds, Wuxi Convertible Bonds, and Sunong Convertible Bonds, were broken on the first day. The convertible bond also became the 4th bank convertible bond that failed on the first day of listing.
“The scale of the convertible bonds issued this time is relatively large, which may increase the pressure on future share conversions. The longer time limit for interest payment, the lower allocation rate of shareholders, and the high comparison between the conversion price and the current share price may all be the reasons for the break. Regarding Qilu Bank’s failure to issue convertible bonds on the first day of listing, Wang Pengbo believes that there are many reasons. In addition to the large market, bank convertible bonds have weak flexibility and are relatively unsought following by funds.
According to the data, as of the close of trading on the 19th, the conversion price of Qilu convertible bonds was 5.87 yuan, the conversion value was 71.04 yuan, and the conversion premium rate was 33.69%.
It is understood that Qilu Bank was established in June 1996 as a joint-stock commercial bank and was listed on the Shanghai Stock Exchange on June 18, 2021.
In terms of performance, Qilu Bank’s performance in recent years has been stable, and it has achieved rapid growth in the first three quarters of this year, with both revenue and net profit achieving double-digit growth. The third quarter report shows that Qilu Bank’s operating income in the first three quarters of this year was 8.405 billion yuan, a year-on-year increase of 17.21%; the net profit attributable to shareholders of listed companies was 2.527 billion yuan, a year-on-year increase of 19.93%.
In terms of the stock market, the listing price of Qilu Bank was 5.36 yuan per share. At the beginning of its listing, its stock price rose to a high of 12.07 yuan, but then fell rapidly, and following ups and downs, it basically remained around 4 or 5 yuan. As of the close on December 19, Qilu Bank closed at 4.17 yuan per share, a decrease of 2.57% on the day, with a total market value of 19.1 billion yuan.
