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Friday, March 29, 2024

China Telecom dismal performance blamed for China Mobile stocks pullout

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Investors have set a new record and recently abandoned as much as 756 million yuan or approximately $121 million worth of China Mobile’s A shares in apparent disappointment over China Telecom’s performance.
This development was revealed in the A-share IPO results released by China Telecom, which has a 40-percent stake in Dito Telecommunity, the third telco player in the Philippines, on Dec. 28.
China Telecom has been delisted by the United States and offers A-share prices lower than the issue price.
China Mobile (00941.HK)’s public notice showed the number of unpaid A shares online trade was over 12.91 million, translating to 743 million yuan (approx. $119 million) worth of shares, while the number of unpaid offline trade was more than 220,000 shares, corresponding to 12.7 million yuan (approx. $2.03 million).
The total added up to 756 million yuan (approx. $121 million), which is higher than the 653 million yuan (approx. $100 million) previously reported from China Postal Savings Bank Co., Ltd. (601658.SH) in Dec. 2019, thereby setting a new record.
China Mobile, China Telecom (00728.HK), and China Unicom (00762.HK) were China’s top three telecom operators which were ordered delisted from the New York Stock Exchange (NYSE) by then U.S. President Donald Trump via Executive Order 13959 he issued on Nov. 12, 2020.
Pursuant to the executive order, the Office of Foreign Assets Control (OFAC) of the U.S. Department of the Treasury issued a letter to the NYSE on Jan. 5, 2021, clarifying that after 9:30 a.m. Eastern Standard Time on Jan. 11, 2021, U.S. persons cannot engage in certain stock transactions of these companies.
On Jan. 6, 2021, the NYSE initiated the delisting procedure for the three telecom operators. Two weeks later, China Mobile submitted a written request to the NYSE for reconsideration.
The New York Stock Exchange denied China Mobile’s request for reconsideration on May 6, 2021.
Of the three telecom operators, only China Unicom (600050.SH) has long been listed on China’s A-share market.
China Mobile’s board of directors okayed the proposal to issue RMB shares on May 17, 2021, and it was then approved by the China Securities Regulatory Commission on Nov. 4.
China Mobile had aimed for the largest A-share IPO in a decade, as it intended to raise 56 billion yuan (about $8.96 billion) in the A-share initial public offering (IPO), higher than China Telecom’s projected IPO goal of 54.4 billion yuan (about $8.70 billion).
Following suit with China Telecom, China Mobile’s A-share issuance adopted a Green Shoe mechanism to maintain stock price stability. Despite this option however, its share price began to fall on the second day of its A-share listing, and dropped below the issue price on Sept. 24. This status continues to today.
In a recent report by China’s Economic Observer, brokerage analysts believe that China Telecom’s price drop below its issue price was one of the reasons for investors’ abandonment of China Mobile’s A-share stocks.
China Unicom (600050.SH), which has been listed on Shanghai A shares since 2002, experienced a staggering downward trend in 2021. Its stock price stood up 4.3 yuan (approx. $0.69) on Jan. 4, peaked in March at 5.4 yuan (approx. 0.85), and closed at 3.93 yuan (approx. $0.63) on Dec. 31.

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