The continually worsening Chinese economy, amid increased scrutiny toward companies listed on stock exchanges, has prompted the cancelation of an initial public offering (IPO) listing from Ocean Family, one of the country’s most ambitious tuna and squid fishing and processing firms.
Zhejiang-based Ocean Family, also known by its Mandarin name Da Yang Shi Jia, recently canceled its listing on the Shanghai Stock Exchange after the listing’s sponsor, Caitong Securities, backed out of the CNY 1.6 billion (USD 220 million, EUR 202 million) offering. This was partly due to China’s securities regulator focusing greater scrutiny and responsibility on the sponsors of IPOs in recent months, causing the number of IPOs on the country’s stock exchanges to fall by one-third compared to the same time last year.
The IPO cancelation also places financial strain on Ocean Family’s parent company, Wanxiang Sannong Group Co., owned by entrepreneur Lu Guanqiu, which planned to use the funds from the IPO to launch a processing and logistics park, as well as to repay bank loans.
China’s stock markets have been the recent focus of government reforms intended to streamline the listing process for companies, while also removing firms authorities deem not ready for listing.
Ocean Family – which authorities have closely analyzed – has been the target of authorities in the past, as customs officials heavily scrutinized the company’s original IPO ambitions in late 2021 due to “unfit” seafood imports that were destined for consumers up and down China’s east coast.
According to the prospectus published for its IPO, Ocean Family operates 22 ultra-low-temperature tuna longline fishing vessels, seven groups of tuna purse-seine vessels, and 11 squid-fishing vessels.
Through its wide operations, Ocean Family has helped to grow the popularity of tuna in China, opening a restaurant chain called Tonno and a series of convenience stores. The company also signed a strategic partnership with online retailers, including Womai.com, to cash in on the growing embrace of Japanese-style dining by middle-class Chinese citizens, a trend now affected by the Chinese ban on Japanese seafood imports put in place following the release of radioactive wastewater from the Fukushima Daiichi nuclear power plant on 24 August.
Ocean Family’s prospectus also lends perspective on the growth of China’s distant-water catches, highlighting how the practice has grown throughout the past few years.
The company’s production varied from 46,600 metric tons (MT) in 2019, to 47,900 MT the following year, and 40,800 MT in 2021, comprising 11 percent, 14.63 percent, and 12.67 percent, respectively, of China’s national output, according to the firm. Ocean Family’s squid production, meanwhile, totaled 16,200 MT, 29,700 MT, and 21,400 MT over the three years, as cited in the company’s prospectus. That accounted for 3.75 percent, 5.71 percent, and 3.34 percent of national production, according to the company.
Ocean Family’s revenue grew from CNY 3.1 billion (USD 434 million, EUR 372 million) in 2019 to CNY 3.2 billion (USD 448 million, EUR 384 million) and CNY 3.9 billion (USD 546 million, EUR 468 million) in 2020 and 2021, respectively, with particular growth in online sales, according to its latest financial report.
Squid and tuna aside, Ocean Family sought to build a broader seafood distribution business, signing deals with two Norwegian salmon firms – Leroy Seafood and Sjor – in 2021, shortly after Ocean Family announced its intention to list its IPO.
In 2020, Ocean Family broke ground on the construction of a CNY 1 billion (USD 140 million, EUR 130 million) processing park named the Distant Water Fisheries Park, also known as Zhoushan National Oceanic Fishery Base Business Center, in Zhoushan, a port city that hosts much of China’s tuna fleet.
Besides prompting the cancelation of IPOs, various pressures facing the Chinese economy – particularly the bursting of a long-simmering real estate bubble – have zapped investor confidence this summer, including international investors previously enthusiastic to contribute toward China’s growth by buying stocks. In mid-August, China’s stock exchanges alerted several large mutual fund houses to refrain for a day from selling more onshore shares than they purchased over a certain period of time.
Chinese authorities are considering cutting the stamp duty on stock trades for the first time since 2008 to revive confidence in the world’s second-largest equity market behind the U.S., Bloomberg reported.
This has all culminated in investors being greatly alarmed at the unraveling of major trust companies like Zhongrong International Trust Co., which this month missed payments on dozens of products. Sucking more energy out of the stock market, real estate development firm Country Garden also missed bond payments last week.
Chinese officials have been unable to boost private consumption to replace real estate and infrastructure as the key driver of growth in the economy. In a research note, Ting Lu, the chief China economist at Nomura, suggested this week that “markets still underestimate the aftermath of the significant collapse in China’s property sector.”
Photo courtesy of Wanxiang Sannong Group
