China Rare-Earth Firm Slumps 17% in Hong Kong Trading Debut

(Bloomberg) -- Shares of China's JL MAG Rare-Earth Co. dropped as much as 17% in their Hong Kong debut after being sold at the bottom of the marketed range in what is the biggest offering so far this year in the Asian financial hub.

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The producer of magnetic rare-earth materials slid to as low as HK$28 on Friday. That's versus an offer price of HK$33.80 apiece in the sale that raised HK$4.24 billion ($544 million). The Chinese company is already listed in Shenzhen.

JL MAG's is the first offering to raise more than $500 million in Hong Kong this year as China's crack down on several private enterprises plus the prospect of rising interest rates cast a shadow over deals in the Asian financial hub. The slow 2022 start contrasts with a busy kickoff in 2021, when 16 companies priced near $8 billion worth of shares last January, Bloomberg data show.

Shares of the 19 companies that debuted in Hong Kong over the past year after raising at least $500 million rose by an average 18% on the first day of trade, according to data compiled by Bloomberg. The average gain among those that debuted over the past six months, though, was just 4%.

At the intraday low, LG MAG Rare-Earth was headed for the worst performance since Feb. 2018 for a Hong Kong listing bigger than $500 million. A-Living Smart City Services Co. declined 23% in its first session on Feb. 8, 2018.

LG MAG Rare-Earth has said it aims to use proceeds of the share sale for construction of a production base in Ningbo, potential acquisitions through 2023 and expansion of a global industry-chain layout. Profit for the six months ending June 2021 was 220.6 million yuan ($35 million), a 141% jump over same period a year earlier, according to the company's prospectus.

Citic Securities Co. and BNP Paribas SA were joint sponsors of the Hong Kong deal.

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