Shares in Hengli Commercial Properties yesterday surged nearly fivefold after the company became a back-door listing for Dalian Wanda Commercial Properties, one of the largest developers controlled by the nation's third-richest man, Wang Jianlin.
The reverse takeover triggered a buying spree among retail investors and small-cap fund managers, pushing the stock up 465 per cent to finish at a record high HK$1.95.
More than 62.2 million shares worth HK$127.1 million were traded.
"Hengli would become Wanda's overseas fundraising platform and an ATM machine to fulfil Wanda's offshore acquisition ambition," said Alma Yang, a portfolio manager with Shenyin Wanguo Asset Management (Asia).
Wang was ranked third on last year's Forbes China rich list with an estimated net worth of US$8 billion.
Dalian Wanda Commercial Properties is the property arm of his business empire, Dalian Wanda Group.
The group operates 55 Wanda Plazas, 34 five-star hotels, 814 cinema screens, 46 department stores and 51 karaoke outlets across the country, according to the company.
It is hard to judge whether Hengli's share price is overpriced after yesterday's surge, since valuation metrics do not apply to the firm because Wanda has not disclosed how many assets it intends to inject into the company, according to Yang.
On Monday, a Wanda Group spokesman said it was looking to buy a European cinema chain.
In December last year, Wang said he was talking to "well-known" hotel brands in the United States for possible acquisitions, Reuters reported.
Last month, Wanda agreed to buy a 65 per cent stake in Hengli for HK$1.31 billion.
The back-door listing is the biggest deal conducted by a mainland property firm in terms of value in the past three years, according to Dealogic.
Fourteen mainland companies have undergone back-door listing in Hong Kong since 2010, Dealogic said.
The deal value reached a three-year high last year as more firms are turning to this method amid weak sentiment in the initial public offerings.