CICC IPO Hits New Hiccup With Chairman Exit
What previously looked like an exciting Hong Kong IPO by CICC, China’s earliest homegrown investment bank, is rapidly losing its luster, with word that the company’s Chairman Jin Liqun is leaving the company. His departure, which was first rumored earlier this month, comes just a week after Levin Zhu, CEO of the company formally known as China International Capital Corp, also resigned to reportedly pursue a start-up in the hot area of Internet finance.
Anyone who senses trouble from these 2 high-level departures in such a short time could be partly right, as it’s certainly never good to see top executives leave a company so close together. The timing looks even worse coming so soon before the planned IPO expected to raise more than $3 billion. But anyone who follows CICC knows the company previously thrived in large part due to its government ties, and that those same ties may be quickly fraying as it loses its status as China’s premier investment bank.
All that said, let’s zoom in on the latest headlines that officially confirm Jin’s departure, adding that he will leave the company in less than 2 weeks. (English article) He will be replaced by Ding Xuedong, chief executive of China Investment Corp, the country’s sovereign wealth fund. The reports add that Jin may be leaving CICC to take up the post as leader of the Asian Infrastructure Investment Bank, a newly formed, government-backed regional lender that will perform roles to the similarly government-backed Asian Development Bank and the World Bank.
That kind of a job might be more suitable anyhow for Jin, who clearly has a background at government institutions. Jin was previously a vice president at Asian Development Bank, and before that he spent 20 years at the Ministry of Finance, where he eventually rose to the level of vice minister.
Levin Zhu has slightly better private sector credentials, having joined CICC in 1998 just 3 years after its founding as a joint venture between the central government and US investment banking giant Morgan Stanley (NYSE: MS). But once again, Zhu’s biggest credential wasn’t his actual experience in the sector but instead his powerful father, Zhu Rongji, who was China’s premier at the time and led many of the country’s economic reforms in the 1990s.
Jin’s and Zhu’s strong government connections were instrumental in helping CICC to land many major investment banking deals as some of China’s largest state-run companies made domestic and international IPOs between 1995 and 2010. But these days the company has been overtaken by other domestic underwriters like Citic Securities (HKEx: 6030; Shanghai: 600030), and was only the nation’s 5th biggest domestic investment bank last year.
Frankly speaking, I’ve always been a bit skeptical of CICC ever since Morgan Stanley decided to sell its stake in 2010. After all, if CICC was such a well-run company with such big advantages in China, then why would a global leader like Morgan Stanley want to dump its one-third share of the company? CICC’s decline since then, coupled with these latest 2 departures, seems to reaffirm that other fundamental issues are probably plaguing the company behind the scenes.
So, what does all this mean for CICC’s IPO? The latest reports indicate that the departure of first Zhu and now Jin could delay the offering from its earlier planned date by the end of this year. That fact does seem to indicate that neither Zhu’s nor Jin’s departure was planned, and that CICC could soon undergo a major internal overhaul to try and make it more commercially competitive. If that happens, the IPO could be delayed indefinitely, and there’s a strong chance it won’t happen until the second half of next year or more likely even later.
Bottom line: The departure of CICC’s chairman may reflect a major internal overhaul is coming for the company, which could delay its planned IPO for a year or more.
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