China National Offshore Oil Corporation Limited: Overseas IPO (A)

In October 1999, with CNOOC Ltd.’s IPO only 55 hours away, the lead underwriter suggested cancelling the IPO due to under-subscription. After enormous IPO preparations, the failure was unacceptable to everyone at CNOOC. Management at the large Chinese SOE—which had grown out of the giant Chinese SOE CNOOC and had healthy net assets and few of the typical SOE burdens—decided to regroup shortly after the setback. As Chairman and CEO of CNOOC Ltd., Wei Liucheng had a reputation for conducting many reforms with Chinese characteristics, and going public was supposed to help CNOOC go further down this road. However, it seemed CNOOC Ltd. had been too optimistic about its strengths, and overseas investors generally worried about Chinese SOEs’ corporate governance. The under-subscription caused many people to reflect and debate on the reasons for the failure, especially pricing. Management of CNOOC desperately needed guidance before taking their next step.