SAP Eyes Dormant Int’l Board 思爱普欲登陆中国国际版
I was amused to read a new report saying that German business software giant SAP (Frankfurt: SAP) may list its shares on China’s planned International Board in Shanghai, since it’s been quite a while since I’ve read any reports like this, which were still quite common as recently as 2010. If I were an optimist, I would say these new reports might indicate a launch is coming in the first half of next year for the long-planned International Board, which would allow offshore companies to raise funds through IPOs in China. But instead, these latest reports, which appear to have originated offshore, are probably just a public relations exercise by SAP, which probably just wants to remind everyone of its commitment to China.
Let’s take a look at the reports, which quote an unnamed SAP spokesperson saying the company is considering a potential listing in China, its third major listing complementing current ones in Germany and New York. (Chinese article) The report adds that SAP expects its investment in China to reach $2 billion by 2015. It adds that SAP’s China business expanded by a sizable 40 percent in this year’s third quarter, and that China is now the company’s sixth largest global market.
There’s not much more detail, and probably what’s more interesting about this report is its timing more than the actual news. But before we discuss what the timing could mean, let’s take a look at the long and rocky history of this International Board, which has been seriously discussed for around the last 5 years.
The idea behind the board, which would allow international companies with major business in China to list in Shanghai using yuan-denominated A-shares, was two-fold. On the one hand, it would allow those companies to raise money to fund their China operations. Equally important, it would offer Chinese investors a chance to buy into big-name quality global companies like HSBC (HKEx: 5; London: HSBA) and Standard Chartered (HKEx: 2888; London: STAN), which have announced their intention to list on the board. Such a board would also allow Chinese to purchase shares of so-called Hong Kong-listed “red chip” companies like China Mobile (HKEx: 941; NYSE: CHL) and Lenovo (HKEx: 992), which are technically based offshore and therefore not allowed to list in China under current rules.
Plans were moving along briskly, and talk was strong in 2010 that the board would launch either late that year or in early 2011. But 2010 ended with no launch, and so did 2011. In the meantime, China had launched a Nasdaq-style enterprise board called the ChiNext, and was focused on building that up. Talk for an International Board launch began to grow again in 2011; but then the main Chinese stock markets collapsed, and they have been extremely weak for most of the last year and a half. With domestic markets so weak and no signs of imminent improvement, observers say it’s highly unlikely that stock exchange authorities would launch the international board anytime soon.
So against that backdrop, let’s return to our look at this latest SAP news and what it could mean. Put simply, I think this development probably means very little, and, as I said earlier, is perhaps just part of a public relations exercise by SAP to demonstrate its commitment to China. That said, we should still look for SAP to be among the first wave of foreign companies applying for new China listings when the International Board does finally launch. But that launch is unlikely to come until China’s own stock markets show signs of stability, which is unlikely until the second half of 2013 at the earliest.
Bottom line: SAP’s interest in China’s planned International Board for overseas stocks looks like a PR exercise, with the new board unlikely to launch until late 2013 at the earliest.
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