April 25, 2024

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[THE INVESTOR] Chinese cosmetics pigment supplier Coloray International Investment, whose initial public offering faced tepid demand from investors, said on Aug. 4 that its IPO advisor Shinhan Investor Corp. has announced a voluntary lockup period.

A lockup period is a contractual restriction that prevents large shareholders, such as company executives and investors representing considerable ownership before it goes public, from selling the stock for a period after the IPO.

Coloray is the first Chinese firm to go public in Korea this year. It is the holding company of Zhejiang Coloray Technology Development, a cosmetics pigment supplier for global beauty companies such as L’Oréal and Estée Lauder.

During the two subscription days last week, of 2.8 million shares allocated to retail investors, or 20 percent of the total 14 million shares, only about 1.25 million shares, or 8.9 percent, were subscribed.

Among the total unsubscribed shares of 1.55 million, institutional investors from Hong Kong and Singapore bought more than 260,000 shares worth 1 billion, according to Coloray.

This leaves 9.14 percent, or 1.28 million shares, for Shinhan, which is under obligation to put a lockup period for the half of those shares for one year. The other half will be voluntarily put under a lockup period for a month.

“A voluntary lockup is often interpreted as confidence by insiders in the company,” an industry expert told The Investor on the condition of anonymity. “Shinhan probably wants to send some positive signals to investors.”

Shinhan’s move comes as Coloray’s IPO results show that local investors are worried about the “China risk.”

Market watchers said that investors are still concerned about Chinese companies listed in Korea, whose reputation has been hit hard by scandals involving made-up disclosures and accounting records by those who were listed before 2012.

The sentiment seemed to have eased in 2016 when six Chinese companies went public in Korea after a four-year hiatus.

However, the China discount reemerged as it was revealed in April that China Ocean Resources and Wanli face delisting for fabricating disclosures and accounting records.

Based on institutional demand, the company set the IPO price at the bottom of the expected range between 3,800 won and 5,800 won.

Coloray will make its debut on the nation’s secondary bourse KOSDAQ on Aug. 10.

By Park Ga-young (gypark@heraldcorp.com)