Where do blockbuster IPOs stand as the fizz goes out of Hong Kong’s stock trading debuts?
Disappointing performances by big name listings have led to questions about overpricing and excessively large fundraising targets
On the eve of what could possibly be the world’s biggest initial public offering this year, has the fizz gone out of Hong Kong’s market?
Of the 87 companies that raised funds in the city this year, 53 per cent of the total traded at prices below their offering prices in their first month of trading, according to Bloomberg data. And 20 companies fell below their offering prices on their trading debut.
Investors need to be careful, as it’s unclear if all these listings can be digested by the market and receive a positive response
These also included high-profile technology stocks, the very group of new-economy darlings that exchange officials were so convinced would be the future of the bourse that they overhauled the listing rules to accommodate them.
Overpricing and excessively large fundraising targets are some of the headwinds investors appear to be facing in Hong Kong, especially as many technology and biotechnology companies that go public are still making losses.
ZhongAn Online Property & Casualty Insurance, the city’s largest technology IPO of 2017, was overbought by 391 times and it’s shares soared by as much as 57 per cent within six days of its debut. But it is now trading 17 per cent below its IPO price. Similarly, Yixin Group is trading 50 per cent down from its IPO price, Razer is down 41 per cent and Ping An Healthcare and Technology, also known as Good Doctor, is down by 21 per cent.
In this climate, how Xiaomi’s US$10 billion IPO – expected next month – fares could determine how attractive Hong Kong’s newly overhauled equity market might seem to other Chinese unicorns considering large valuations and fundraising. The company is the world’s fourth-largest smartphone maker, and a lot will be riding on the success of its listing.