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 of all time in China.
The IPO move represents a return to public company status for a firm that has frequently been ahead of its time.
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.
When the adventure failed to provide the anticipated boost, Bona became one of the first Chinese companies to withdraw from the U.S. securities markets. 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. It is understood that he has tried on several occasions to get Bona a new listing either in Hong Kong or on a mainland Chinese exchange.
In a flurry of some 50 regulatory filings, including a 735-page prospectus and a 113-page summary, the company has now laid out the details of its new launch.
The company will sell 275 million new shares in an issue backed by blue-chip mainland firms China Dragon Securities and CITIC Securities. The amount of new capital it brings will only be known when the sale price of the shares is disclosed later this week. The counter is scheduled to start trading on Tuesday next week.
Yu is the largest shareholder with a 28% holding. Alibaba and Tencent, which participated in the 2015 delisting operation, also have major share stakes.
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 in the six months to June climbed by 82% to RMB1.47 billion ($217 million). Earnings increased fivefold to RMB310 million ($45.8 million).
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, which once held the record for the biggest IPO on the New York Stock Exchange, last week filed to convert its secondary listing in Hong Kong into a joint primary listing. The detail is crucial.
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. But they are also being hemmed in by Chinese regulations which aim to limit transfer of data outside China. Both countries have national security misgivings about their presence in the U.S.
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.
Alibaba shares initially surged in response to the news. But later slipped back as it became clear that China-U.S. tensions are unabating and that the Chinese economy has slowed markedly.