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China’s Tianqi Lithium was due for drop, analysts say, as value falls US$4.5 billion ahead of Hong Kong trading debut

  • Investors concerned that the stock was overvalued used a negative social-media post as an excuse to dump shares in Shenzhen, analysts say
  • The company lost 14 per cent of its market capitalisation in the two days before its trading debut in Hong Kong on Wednesday

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The production base of Tianqi Lithium in Shehong, in China’s Sichuan province. Photo: Handout
Zhang Shidong

Mainland-traded shares of Tianqi Lithium have lost nearly US$4.5 billion just ahead of the company’s Hong Kong trading debut on Wednesday – the city’s biggest initial public offering (IPO) this year.

Shares of the second-largest lithium compound producer in Asia slumped 5 per cent to 127.80 yuan on Tuesday in Shenzhen, extending a 9.2 per cent drop the previous day and wiping out almost 30 billion yuan (US$4.5 billion) in value.

While a negative social-media post by the wife of a disgraced former hedge fund manager appeared to spark the sell-off, analysts said the stock was due for a reality check in any case, and added that it may fall further as its rise has been outpacing the price of lithium.

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The western Sichuan province-based company’s Hong Kong debut had met with enthusiasm from global investors, enabling Tianqi Lithium to raise HK$13.1 billion (US$1.7 billion) of net proceeds after pricing its shares at HK$82, the top end of the marketed price range – in a rare feat for the city’s IPOs. Trading in Hong Kong commences on Wednesday under the stock code 9696.
An aerial view captured in January 2013 shows brine pools and processing areas of a lithium mine in the Atacama Desert in northern Chile. Photo: Reuters
An aerial view captured in January 2013 shows brine pools and processing areas of a lithium mine in the Atacama Desert in northern Chile. Photo: Reuters
The sell-off highlighted the risk that Tianqi Lithium is vulnerable to negative headlines after the stock more than doubled over the past two months on expectations of rising demand spurred by strong sales of electric cars. Green-energy names have recently won back favour among traders, as the risk appetite on the broader market picks up on hopes of a rebound for China’s economy in the second half.
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