Bona Film Group, one of China’s most consistently successful private sector movie studios, is in the final stages of launching an IPO on the Shenzhen stock exchange. The company was behind last year’s “The Battle of Lake Changjin,”The highest-grossing film in China.
This IPO is a move to return to public company status for a company that has been far ahead of its times.
Bona was in the early wave of Chinese companies to list their share in the U.S. and achieved an IPO on the NASDAQ exchange in 2010, in the hope that U.S. investors and financial markets would have a greater understanding of a media business – and therefore accord Bona a higher valuation – than if it listed in Hong Kong or mainland China.
Bona was one of the first Chinese companies that resigned from U.S. Securities Markets after the venture failed to deliver the expected boost. Yu Dong, the company’s talismanic founder, a distributor turned producer, took Bona private with the aid of media and tech industry investors in 2015. According to reports, he tried several times to get Bona a listing on an exchange in mainland China or Hong Kong.
The company now details its new launch in a series of 50 regulatory filings. These included a 735-page prospectus, and a summary of 113 pages.
In an issue backed blue-chip mainland companies China Dragon Securities, and CITIC Securities, the company will sell 275 millions new shares. Only the price at which the shares are sold will reveal the amount of capital that it has raised. This information will be available later in the week. Trading is expected to begin on Tuesday of next week.
Yu is the largest shareholder, holding 28%. Tencent and Alibaba, both of which were involved in the 2015 delisting, have large shareholdings.
While other Chinese film companies have warned of torrid times – Huayi Bros. has endured three years of losses and Wanda Film recently warned of $85 million of losses in the first half of this year – Bona has seen its profitability surge due its slew of hit patriotic titles. Revenues rose by 82% to RMB1.47billion ($217m) in the six-months to June. Earnings grew fivefold to RMB310 millions ($45.8million).
Bona’s decision to exit the U.S. stock markets, where Chinese firms long ago fell out of favor with investors, may now be followed by other, far-bigger, firms.
Alibaba, once the record holder for the largest IPO on New York Stock Exchange, filed last week to convert its secondary listing from Hong Kong into a primary listing. It is important to pay attention to the details.
On one hand, Chinese companies are under growing pressure to comply with U.S. accounting standards if they want to retain their access to America’s organized capital markets. They are also being restricted by Chinese regulations that limit data transfer outside China. Both countries have concerns about the U.S. security.
Alibaba’s decision to have a joint-primary listing in Hong Kong is intended to ensure that it retains public company status, and investors can continue to trade the stock, in the event that it is ever forced to leave the U.S.
The move also has a second, significant benefit, in that the Hong Kong primary listing will allow Alibaba’s shares to be bought and sold via the Stock Connect, a mechanist that allows two-way trade in mainland Chinese and Hong Kong equities and mutual funds. Until this happens, most ordinary individual investors in China are not able to invest in the country’s most iconic private sector enterprise.
Initial reaction to the news saw Alibaba shares surge. However, the shares of Alibaba fell as it became apparent that China-U.S. tensions were not abating and that China’s economy had slowed significantly.