By Clement Tan and Jill Mao
May 26 (Bloomberg) — Two decades ago, the Wang brothers sold flavored milk and yogurt to children in China. Last week, they sold shares in their airline in an IPO to become millionaires.
Their journey from a poor fishing village to the largest shareholders of budget carrier Juneyao Airlines Co., which begins trading in Shanghai this week, is a success story that mirrors China’s growth. The company is benefiting from a government plan to encourage entrepreneurship in an air-travel market that’s set to become the world’s largest over the next two decades and is currently dominated by state-owned airlines.
At its offer price, Juneyao Air will be valued at 6.35 billion yuan ($1 billion). That’s about a tenth of the market value of Spring Airlines Co., whose stock has surged over 600 percent since a January listing. Every one of the 147 mainland initial public offerings that began trading over the past year has jumped the maximum 44 percent on its first day of trading.
“Certainly, Spring Air’s crazy surge, which outperformed even the broader bull market, would be on the minds of many people,” said Zhang Qi, a Shanghai-based analyst with Haitong Securities Co. “With oil prices at low levels, airlines that are more efficiently run would make an attractive investment proposition.”
Juneyao Air, whose Chinese name means lucky, is selling 68 million shares at 11.18 yuan apiece, raising 760 million yuan from the offering. The stock begins trading May 27.