NewWild rides in Hong Kong’s 'other' stock market: warnings on wine suppliers, manufacturers and tech companies listing publicly
A wine supplier to a Michelin starred Hong Kong restaurant famous for its roast suckling pig saw its share price explode with more force than a popped bottle of vintage Krug earlier this month amid a recent pattern of fizzy listings that are making giddy investors cheer and swoon in equal measure.
The excitement is taking place in a niche section of Hong Kong’s second board, the Growth Enterprise Market. Here, small and mid sized firms can opt for what’s called a placement listing that allows companies to raise small chunks of capital without the cost and time involved in a formal initial public offering. And as the GEM board website tagline reads, “A ‘Buyers Beware’ Market for Informed Investors”, the trade is not without caveats.
“Most analysts and institutional investors will not invest in placement listings but some retail investors will like to try their luck. Myself I strongly advise against it as whether you can make a profit on the first day of trading is a big question mark,” Tung Shing Securities equities analyst Ivan Li cautioned.
Take the case of Madison Wine. A Cayman Island registered company with a single retail shop along the Wanchai section of Gloucester Road and a sales contract with upmarket Cantonese restaurant Fook Lam Moon; Madison Wine reported net profits of HK$14.2 million for the financial year ending March, according a listing document, and the firm went on to issue 100 million shares at HK 75 cents each earlier this month.
By the end of trading on the first day those shares had run up a storm closing 826 per cent above the listing price at HK6.20. Ten days later and the shares had surged to HK$9, a 1200 per cent gain from the original listing price. The shares have since moderated somewhat, finishing at HK$8.87 on Monday.
Madison Wine spokeswoman Grace Lai said the firm did not know who was trading the shares.
One answer to this mind blowing return may lie with the firm’s original book building effort. 94.6 per cent of Madison Wine’s free float shares were held by just 25 investors, a stock exchange filing revealed the day before trading commenced. Such a concentration of shares is both a warning and a welcome sign to investors on the look out for thinly traded stocks with nail biting volatility.