Chris Wright, October 2016
Postal Savings Bank of China’s September IPO was the biggest worldwide for two years, raising $7.4 billion. It also set another record: the highest number of bookrunners ever wedged into a single deal, at 26.
There was a time when three would have been considered ample, but the modern stance of Chinese capital markets mandates is to keep everybody happy – or nobody, given the dilution of fees between so many bankers. The front cover of the prospectus looks like an attempt to fit every logo in contemporary global and Chinese investment banking on to a single page.
On first glance, $7.4 billion between 26 managers does not seem quite so outlandish: that’s $284.6 million to place per bookrunner.
The problem is, that’s the wrong calculation, since $5.7 billion of the deal is allocated to cornerstone investors, mainly fellow state-owned enterprises such as Shanghai International Port Group. So there’s only about $1.7 billion of equity that needs to be placed – that’s only $65.4 million per bookrunner, a level one might more commonly associate with a lowly co-manager.