HONG KONG -- China Telecom shares opened 6.7% higher on their market debut in Shanghai on Friday, just months after the company was kicked off the New York Stock Exchange.
The initial response to the largest mainland listing in a decade may cause some anxiety for the upcoming initial public offering of bigger rival China Mobile, which also was forced to delist by the U.S. in May, and Syngenta Group, the Swiss seed and fertilizer unit of China National Chemical Corp.
There is a 44% cap on first-day gains on the Shanghai Stock Exchange and the most sought after offerings typically hit that mark.
China Telecom shares spiked in the last minutes of the morning session to reach 5.39 yuan, up 19% from the issue price of 4.53 yuan. The shares ultimately closed at 6.11 yuan, for a gain on the day of 34.9%.
The company's Hong Kong shares, however, finished 5.8% lower at HK$2.76.
The arm of state-owned China Telecommunications raised 54.2 billion yuan ($8.36 billion) through the Shanghai share sale.
The offering is the latest sign of Beijing's resolve to minimize the fallout from a U.S. investment ban that prohibits American citizens and companies from trading shares in companies on its blacklist.
The list comprises more than 50 Chinese companies, including telecom equipment maker Huawei Technologies and Semiconductor Manufacturing International Corp. The list was drawn up in response to the companies' alleged ties to China's military or the sale of surveillance technology used against religious minorities and dissidents.
China Telecom, along with state-run peers China Mobile and China Unicom, was suspended from trading on U.S. exchanges in January and delisted in May to comply with an executive order signed by former President Donald Trump. The Biden administration has kept up the pressure, and in June unveiled a refined order that analysts said is more legally enforceable.
China Mobile, the world's leading telecommunications carrier by number of subscribers, hopes to complete a Shanghai share sale this year, Chairman Yang Jie said last week.
China Mobile plans to issue up to 1.109 billion new shares, including the full exercise of an overallotment option representing a 5.14% stake, according to a draft prospectus released by the securities regulator on Wednesday. The price has yet to be determined, but based on the shares' HK$51.45 close in Hong Kong on Thursday, the offering would raise 57.05 billion Hong Kong dollars ($7.33 billion).
The company intends to use half the proceeds to build its 5G network, with the rest deployed for cloud computing and cutting-edge infrastructure projects, the carrier said. The listings also offer an opening for local investors, who previously had limited access to the carriers' shares.
"Our A-share listing, besides raising new funds, provides a good opportunity for our numerous users to participate in our growth," Yang said. Investment opportunities beyond mainland markets are restricted to a few regulator-sanctioned arrangements, including special quotas, or formal trading channels with the Hong Kong Stock Exchange.
China Unicom, which already has a subsidiary listed in Shanghai, on Thursday said it is also considering an IPO for its smart internet technology unit on either of the two mainland exchanges and indicated more spinoffs were planned.
"We have four to five more in the pipeline that we are nurturing now," Chairman Wang Xiaochu said. One is a joint venture with China Merchant Bank, which is growing at a "rapid pace," he said.
As for China Telecom, the carrier plans to use the money raised to invest in 5G networks, cloud-network integration, and research and development, the company said last week. It budgeted 87 billion yuan for capital spending this year, a 2.6% increase from last year.
Chairman Ke Ruiwen said on Aug. 10 that China Telecom "will grasp this A-share issuance as a turning point" to deepen corporate reform.
Twenty strategic investors, including telecoms equipment maker Huawei Technologies and online video app operator Bilibili, took shares in the offering, which Ke said would enable collaboration in 5G industrial applications and cloud-network integration. The company intends to "construct an open and cooperative industrial and capital ecology, and to reform the system by stimulating corporate vitality," he said.
However, 16 of the 20 investors are state-owned, including big names such as State Grid Corp., China Development Bank and China's national semiconductor investment fund. China Telecom's parent will retain a stake of more than 60%.
The three privately listed companies that took part in the subscription cannot sell China Telecom shares for 36 months, three times longer than the standard applied to bigger state-owned investors.
Chen Rui, chairman and CEO of Bilibili, said he was "excited" to take part in "this pivotal moment" for the homecoming listing of a strategic state-owned company.
But Brian Dapeng Gong, an analyst with Citigroup, told clients in a note that he did not think an equity investment was needed for strategic business cooperation.
Bilibili shares in Hong Kong dropped for five straight days after the investment was announced, losing 21% of their value through Tuesday, exacerbated by another wave of attacks by state media against the online gaming and video platform sector.
For two smaller listed entities that took shares in the offering -- cloud security platform provider DBAPP Security and cloud computing and network security vendor Sangfor Technologies -- the investment is significant.
Shanghai-listed DBAPP Security said the investment "will have a certain influence on the company's cash flow." It spent 500 million yuan in subscribing to China Telecom shares, more than half its cash and cash equivalents of 949 million yuan as of the end of March.
Sangfor warned investors that the longer lockup period "carries a risk of price fluctuation in the secondary market." The Shenzhen-listed company, which spent the same amount as DBAPP, reported 343 million yuan in cash at the end of the first quarter.