Global New Material, a leading company in the global new consumable materials market, gave a ‘big gift’ to its investors before officially listing. On July 9, Global New Material (stock code: 6616) announced an IPO price of HKD3.25, 7.67% lower than the previous IPO floor price. From the investors’ perspective, Global New Material lowering its IPO price from that of the IPO period, in fact, has left more room for market share price appreciation in the future.
High-quality companies prefer low-price offerings in mature capital markets
In mature capital markets, the lower-price offering is an effective strategy for information transmission. Those high-quality companies that are confident in their future business operations prefer the low-price offering strategy with higher market awareness, instead of advertising, extended lock-up period, underwriting by high-reputation investment banks or other approaches to deliver their intrinsic value to the markets.
The low-price offering is not harmful to high-quality companies as the low-price offering will attract more investors and will further lay a solid foundation for their post-listing stock price growth. Continuous growth in stock price and market value is extremely conducive to post-listing financing and therefore, will make up the value that companies give to their investors in IPO.
Besides, the low-price offering strategy is unlikely to be copied by poorer-quality companies. Since poorer-quality companies probably “usher in the peak when they go public” and then experience stock price decline, they will not and dare not purposefully lower their offering price. In fact, Global New Material lowering its IPO price is probably not only for this purpose.
Global New Material is preparing for access to Southbound Trading Link
Low-price offering activates stock trading, which probably demonstrates Global New Material’s preparation for access to Southbound Trading Link. Access to Southbound Trading Link is a very essential step to enhance market attention and activate stock trading of stocks listed in Hong Kong. It is learned from the management that Global New Material, which has just completed its IPO, is currently preparing for access to Southbound Trading Link.
The inclusion of Hang Seng Indexes will affect the inclusion of the Southbound Trading Link. According to the inclusion criteria of Hang Seng Indexes, the turnover rate is also considered in addition to the examination of the companies with the top 95% of the market capitalization in the option pool. Global New Material’s low-price offering strategy can facilitate faster meeting the requirements at the market dealing level.
Global New Material, which is preparing for access to Southbound Trading Link, is expected to experience stock price growth. Aftermarket close on August 20, 2021, the results of the latest mid-term review of Hang Seng Index constituent stocks will be released. As calculated by brokerage firms, the average market value threshold for entry into Hang Seng Composite Index this time is approximately HKD8.77 billion.
Global New Material currently applies an offering price of HKD3.25 with a stock market value of HKD3.779 billion, which is lower than that required for access to Southbound Trading Link. However, the company still strongly desires to make access to Southbound Trading Link, indicating that its management is confident in its future business operations and post-listing stock price performance.
Two new materials are of great potential in huge consumer markets
Both pearlescent pigments and synthetic mica, Global New Material’s two main types of new material products, are of great potential in huge markets in the fields of basic necessities of life and other consumer fields.
Pearlescent pigments are penetrating high-end fields at an expedited pace while replacing traditional pigments. As shown in the prospectus, Global New Material’s pearlescent pigments have two major significant advantages over traditional pigments in terms of being colour-lasting, toxic-free, harmless and environmentally friendly. In addition to traditional application fields, there is a fast-growing demand for pearlescent pigments in recent years in various high-end fields such as automobiles and cosmetics.
From 2021 to 2025, the compound annual growth rate of the global pearlescent pigment market will further climb to 23.9%, and the compound annual growth rate of pearlescent pigments in the global automotive and cosmetics sectors will surprisingly reach 47.1% and 32.8% respectively. Therefore, Global New Material’s pearlescent pigment products are expected to be applied in a wider range of application fields and occupy a huge market share with tremendous potential for future growth.
Synthetic mica is also penetrating mid-to-high-end consumer markets, such as the fairly popular field of fuel cells. In view of the exhaustion of natural mica resources in China and synthetic mica products’ advantages in terms of insulation, high-temperature resistance and corrosion resistance, there is an extremely strong demand for synthetic mica products and synthetic mica-based pearlescent pigments which are priced at a medium-to-high level and are mainly applied in mid-to-high-end industrial fields and other fields such as automobiles and cosmetics.
Moreover, according to scientific research findings, synthetic mica materials are being used to improve the existing fuel cell technology by virtue of their high proton conductivity and excellent heat resistance. The existing product prototype, i.e. mica membrane, is recognized as a new proton-conducting membrane with high proton conductivity.
To sum up, pearlescent pigments and synthetic mica, as two new material products, are of tremendous market potential, and Global New Material, as the leader in the fields of such two new materials, has gained dominant competitive advantages.
Comprehensive advantages cement the dominant position in the fields of the scarcest resources
In both pearlescent pigments and synthetic mica, Global New Material has built significant advantages in technology and business scale. In 2020, in terms of corporate revenue, Global New Material was the largest pearlescent pigment manufacturer in China with a market share of 11% and ranked fourth in the global market with a market share of 3%. Global New Material has sold its products to more than 30 countries and regions worldwide, and its technical team is headed by Professor Jiansheng Fu – known as the leading authority on pearlescent materials in China and father of chameleon pearlescent materials.
According to the prospectus, Global New Material is currently the only company in the field of synthetic mica that possesses all the core technologies of synthetic mica. Backed by strong R&D, Global New Material can launch over 100 new products each year, leading the global industry.