Leapmotor, Onewo IPOs undersubscribed in Hong Kong as stock investors get cold feet amid market sell-off

Hong Kong investors failed to fully subscribe for their local allocations in the two stock offerings as the Hang Seng Index slides to an 11-year low
Some 35 of the 47 IPOs in Hong Kong this year have handed investors losses, with Gogox the worst of the lot with a 76 per cent slump

IPO

Zhang Shidongin Shanghai

Published: 1:00pm, 28 Sep, 2022

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A sell-off in global stock markets is giving pause to investors in Hong Kong as Zhejiang Leapmotor Technology and Onewo Inc struggled to raise as much as HK$14.3 billion (US$1.8 billion) after an underwhelming response to their stock offerings.

Investors signed up for 2.146 million shares, just 16.4 per cent of Leapmotor’s local allocation, pushing the unwanted 10.9 million shares to overseas subscribers, according to an exchange filing on Wednesday. That represents one of the worst take-up rates in the city’s initial public offerings (IPOs) in recent years.

While the Chinese electric-vehicle maker succeeded in selling all of the 130.8 million shares on offer to globally, the IPO was priced at the lowest end of the marketed range of HK$48 to HK$62 per share to generate HK$6.06 billion of net proceeds.

Onewo, the property management services company controlled by developer China Vanke, also failed to impress local investors who bought 9.5 million shares or 82 per cent of the allocation, according to a separate exchange filing. Onewo priced its IPO at HK$49.35 per share, the lower half of the HK$47.10 to HK$52.70 marketed range, allowing Vanke to collect HK$5.6 billion of net proceeds.

Engineers work on the assembly line of T03 electric small crossover at a factory of Zhejiang Leapmotor on April 26, 2022. Photo: Getty Images

Leapmotor had targeted HK$8.11 billion at the top-end of its IPO price range, while Vanke would have received HK$6.11 billion. Both stocks will start trading in Hong Kong on Thursday.

China Vanke’s US$784 million IPO spin-off attracts Temasek, UBS, hedge funds as cornerstone investors

Tepid demand probably foreshadows a shaky debut. Market sentiment has soured amid the latest sell-off in stocks worldwide as the number and size of IPOs shrank. About 35 of the 47 IPOs this year are trading below their offer prices, according to Bloomberg data.

The Hang Seng Index has dropped 26 per cent this year, among the worst-performing major benchmarks globally. Only South Korea’s Kospi has fared worse than local shares. The benchmark reached the lowest level since October 2011 on Wednesday after interest-rate increases fuelled currency slump and recession fears.

“The poor performance of IPOs is more driven by pessimism about the broader market,” said Wu Kan, an investment manager at Soochow Securities in Shanghai. “This pattern will not change until the general market stabilises.”

A number of companies are set to list in the city, with Betters Medical Investment Holdings, CALB, and AIM Vaccine starting trading next week.

Flowing Cloud Technology, a company providing AR/VR content and services, will start trading on the main board of the Hong Kong stock exchange on October 18. Dubbed as “the first metaverse stock”, the company contributed to 2.6 per cent of the total AR/VR content and services market in China, ranking first in the country, according to its prospectus, which cited data from consultancy company iResearch.

The company serves some of the biggest tech giants in China, such as Baidu, Tencent Holdings, JD.com and artificial intelligence leader SenseTime. Hong Kong-listed SenseTime, which is also a cornerstone investor, will explore more partnerships and cooperation with Flowing Cloud, Flowing Cloud’s executives said at a press briefing on Wednesday.

The worst performer is Gogox Holdings, a Chinese logistics services provider. Its shares have slumped 76 per cent since the Tianjin-based company debuted on June 24 after completing its US$85.5 million downsized offering. In contrast, China Tourism Group Duty Free, the biggest IPO in Hong Kong this year, has risen 21 per cent since its debut on August 25.

The 47 IPOs generated a 1.1 per cent loss on average for IPO subscribers, the Bloomberg data shows. The hardest-hit were companies in the technology and telecoms sectors, whose stocks suffered an at least 37 per cent loss on average.

Additional reporting by Iris Ouyang