News Article by DJ posted on October 26, 2000 at 03:44:32: EST (-5 GMT)
Sinopec's IPO Hit By Human Rights Protests
Dow Jones Newswires
October 25, 2000
By Murray Hiebert
Far Eastern
Economic Review
HONG KONG -- A second cash-hungry Chinese oil giant has limped on to
the New
York Stock Exchange after stumbling into protests from human-rights
groups,
religious organizations and labor unions opposed to its investments
in Sudan.
China's second-largest oil firm, China Petroleum & Chemical
Corp. (SNP), or
Sinopec, raised about $3.4 billion in an initial public
offering Oct. 18 in
New York, London and Hong Kong.
Sinopec had looked set to escape the storm that engulfed the stock
offering
of PetroChina (PTR), China's largest oil company, in April. But the
day
before Sinopec was slated to set the price for its IPO, The Asian Wall
Street
Journal disclosed that one of the company's units has an office and
company
executives in Sudan.
This prompted human-rights activists in the U.S. to warn that some of
the
proceeds from the unit could be diverted to the Islamic government of
Sudan,
which has waged a 17-year war against Christians in the south.
But with only a week until the listing, opponents had less time to generate
a
storm of protest than they had when PetroChina listed. PetroChina
originally
hoped to raise between $7 billion and $10 billion with its IPO but
had to be
content with just $2.9 billion.
Sinopec priced its global offering at $20.65 for each American
Depositary
Receipt, equal to 100 shares. By Oct. 23, the price in New York
had slipped
6% to $19.38, even though three oil majors, BP Amoco, Shell and
ExxonMobil,
and several Hong Kong tycoons, including Li Ka-shing of Cheung
Kong and Lee
Shau-kee of Henderson Land, had purchased 55% of Sinopec's
shares in a
strategic lock-up.
Some analysts believe that Sinopec's lackluster performance is due more
to
concerns about the company than human-rights considerations in Sudan. "If
it
wasn't for the big guys underwriting the shares, Sinopec would have a
hard
time selling," says Jim Norman, an oil analyst with industry
newsletter
Platt's Oilgram in New York. "No one outside can say what
Sinopec's real
earnings potential is."
Norman points out that Sinopec imports crude oil at international
prices,
while selling its refined petrol in China below market prices.
But human-rights considerations may yet play an important role in
determining
the value of Sinopecs' shares. Two days after the oil firm's IPO,
the
Commission on International Religious Freedom sent a letter to the
Securities
and Exchange Commission, the body that vets stock listings, asking
the SEC to
investigate the "accuracy and adequacy" of Sinopec's filing. The
religious
commission, which was established by the U.S. Congress to monitor
religious
persecution around the world, charged that Sinopec's prospectus had
"a
material omission" because "nowhere does it disclose any assets or
operations
in Sudan."
In Congress, Republican Senator Sam Brownback is considering legislation
that
would expand the SEC's role in investigating foreign companies seeking
to
list in New York. The senator from Kansas is exploring the option of
forcing
companies to divulge investments in countries that face American
sanctions.
Should Sinopecs' share price fall as a result of a divestment
campaign, some
activists will explore the possibility of mounting
class-action negligence
suits against the SEC and Morgan Stanley Dean Witter,
the oil firm's
underwriters.
A divestment campaign is no idle threat. Late last year, a diverse
coalition
of activists launched a campaign against Talisman Energy of Canada,
which is
involved in a joint-venture oil exploration project in Sudan. Even
though
Talisman's net profits are up 400% this year, its shares are still
trading at
about 10 times this year's earnings, whereas many other oil firms
are trading
at multiples of 18-20 times their
earnings.