Chipscreen’s IPO earnings multiple highest among STAR Market firms so far

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Shanghai Stock Exchange board. (Image credit: Bigstock/TK Kurikawa)

Chipscreen Biosciences’ shares were 2,956 times oversubscribed among retail investors at RMB20.43 per share, Reuters reports. The price marks the highest so far for a company listing on Shanghai’s new Science and Technology Innovation Board, or STAR Market.

Why it matters: Chipscreen’s blowout share offering follows the July 22 listing of 25 other firms on the STAR Market and demonstrates that the hype surrounding the new tech board shows no signs of calming.

  • The same hype has allowed Chipscreen to ramp up its fundraising expectations: it now plans to raise RMB 1 billion ($145 million) at a valuation of RMB 8.38 billion ($1.21 billion), 27 percent higher than previously calculated.
  • It also underlines the difficulties bankers face when setting accurate IPO valuations.

Details: Chipscreen plans to use the IPO proceeds to “strengthen competitiveness, expand market share, and develop new products in a bid to make growth sustainable,” according to founder Lu Xianping.

  • At an offer price of 468-times earnings, the drug company is set to go public at an earnings multiple that is significantly higher than any other China-listed pharmaceutical player.
  • The 25 firms that listed previously saw a 140 percent surge on average the day of their debut.
  • Fierce Biotech reports that investors are counting on Chipscreen to deliver on its innovative pipeline of small molecule treatments for cancer, diabetes, and autoimmune and endocrine diseases.
  • The company has yet to announce when it will officially list on the STAR Market.

Context: The new tech board is part of China’s experiment with a registration-based IPO system to attract companies that would have otherwise listed elsewhere due to the country’s strict listing criteria, including a cap on offer prices at 23-times earnings.

  • It also stands to compete with the Stock Exchange of Hong Kong (HKEX), which recently revised its rules in favor of biotech companies, allowing pre-revenue firms to list publicly.
  • The first biotech firm to list on the HKEX under the new rules, Ascletis Pharma, is currently trading around 66 percent below its IPO price.

Clarification: The headline of this article was updated from “Chipscreen sets highest IPO share price on STAR Market so far” on August 7 in order to provide clarity.