JPMorgan’s IPO Operations Hit Further Chinese Headwinds
Another investigation into its hiring practices in China by U.S. authorities have led JPMorgan (NYSE:JPM) to end its work on a Chinese firm’s initial public offering, making for the second time that JPMorgan has had to drop an arrangement for a Chinese IPO candidate as securities regulators continue to explore whether the bank fell in violation of federal laws when it hired the relatives of current or potential clients to help kick up some business from them.
JPMorgan was in discussions to launch a public offering for Tianhe Chemicals, but it has ended the talks in light of the ongoing probe. Tianhe is a supplier of lubricating oil additives for refiners like China Petroleum and PetroChina; the deal was valued to be worth roughly $1 billion.
At the heart of the concerns is Joyce Wei, who is the daughter of Tianhe Chemicals Chair Qi Wei. Joyce was employed by JPMorgan from January 2012 to August 2013, and thus spurred the concerns under investigation. She now works for UBS, but was employed by JPMorgan under her Chinese name, Jiao Wei. A source conveyed to Reuters that UBS is mandated to work on the Tianhe Chemicals IPO.
The SEC and the Department of Justice have been investigating to possibility that JPMorgan violated bribery laws by “improperly hiring the relatives of well-connected Chinese officials,” Reuters says, adding that the investigation is still ongoing and the bank has not yet been accused of any wrongdoing as it pertains to these situations.
Though Wei is no longer employed by JPMorgan, the bank and Tianhe Chemicals have been discussing the latter’s IPO since “at least” 2011; it’s not known for sure if Tianhe had signed any letters of engagement before — or after — Wei joined JPMorgan, but one source told Reuters that the company planned to list in Hong Kong, after entertaining the idea of listing in London.
Both UBS and JPMorgan refused to offer comments on the story after Reuters’ request, and neither Wei nor Tianhe could be reached. JPMorgan’s setting aside of the Tianhe IPO follows up its walking away from the syndicate of underwriters working on a $3 billion listing by China Everbright Bank Co., back in November.