Nine Facts to Know in Foxconn’s Upcoming Initial Public Offering

Foxconn Industrial Internet Co Ltd (FII), a subsidiary of Foxconn Technology Co. applied to list in the Shanghai Stock Exchange on Monday morning.

FII is a unit of the world’s biggest contract manufacturer controlled by Taiwanese billionaire Terry Gou, with their IPO application approved by the China Securities Regulatory Commission (CSRC) on May 11, aims to issue up to 1.97 billion A-shares, or 10 percent of its post-IPO shares.

The size of the initial public offering (IPO) yet to be finalized, FII’s shares will go on sale on May 24, seeking investments totaling 27.3 billion yuan ($4.3 billion) to be invested in areas including cloud computing, data center and 5G related projects.

According to its prospectus, all shares are new for the IPO, with no transfer of old shares.

As the world’s biggest contract manufacturer, Foxconn’s controlling shareholder is Zhongjian Company (owning 41.14% of shares pre-IPO). Zhongjian Company is an investment holding company with Foxconn Technology Co. holding 100% of its shares.

Foxconn’s net profit is about 5% of Apple’s, which is also the proportion of Chinese manufacturing in Apple’s smartphones. The market capitalization of Foxconn after listing on the A-shares market in China will reach 860 billion yuan ($135 billion), an increase of more than twice of the issue price.

If Foxconn succeeds in its IPO, it is likely to become the leading technology company in the A-shares market in China, followed by Hikvision and Qihoo 360 with the latter’s backdoor listing both valued at 340 billion yuan ($54 billion).

Nine key points in the prospectus:

1. Contrary to previous market expectations that the amount to be raised would decrease, Foxconn’s financing goal remains at 27.3 billion yuan ($4.3 billion).
2. The total amount of shares to be released is 1.97 billion shares, which represents 10% of the company post-IPO.
3. Unlike most Chinese listings which only have two tranches of investors – institutional and retail – the firm’s float will also bring in several strategic investors with pre-IP placements. 590 million shares, or 30% of the shares, are set aside pre-IPO placement, with lock-in periods of 12 months or 18 months.
4. The amount of shared sold online is 414 million shares, taking up 30% of the issued amount after deducting the pre-IPO strategic placement.
5. The release time is set to May 24, the same date for online and offline subscriptions. The primary book-building time is set on May 17 and May 18 while the deadline for the strategic investors will also be on May 18.
6. The strategic pre-IPO placement is locked up for a maximum of 3 years and a minimum of 1.5 years. Among the stocks allocated by strategic investors, half of the share will be locked up for at least 12 months, while the other half be 18 months.
7. Seventy percent of the offline share will have one-year lockup period. Investors who participated in the offline subscription shall not have any right to raise any objection thereto.
8. China International Capital Corporation (CICC), as one of the underwriters, will earn 350 million yuan ($55 million). CICC, as Foxconn’s lead sponsor, will receive 350 million yuan ($55 million) for the expenses of underwriting and sponsorship as the prospectus disclosed.
9. The issue price is 14.04 yuan ($2.27) and the stock is under the name of “Industrial Rich Alliance (工业富联)” with the subscription code of 780138.

Featured Picture: FILE PHOTO The logo of Foxconn, the trading name of Hon Hai Precision Industry, is seen on top of the company’s headquarters in New Taipei City, Taiwan, March 29, 2016. REUTERS/Tyrone Siu/File Photo