China Literature listing expected to leave ZhongAn’s IPO in its shadow

Latest estimates by financial data provider Infocast suggest Tencent unit’s IPO is already 150 times oversubscribed

PUBLISHED : Tuesday, 31 October, 2017, 6:36pm
UPDATED : Wednesday, 01 November, 2017, 12:00am

The highly-anticipated initial public offering of Tencent unit China Literature, mainland China’s largest online publishing and e-book site, has been way oversubscribed, and analysts are now predicting the flotation to be the hottest this year.

Infocast, a financial data provider, said the listing has already locked up a preliminary HK$130 billion (US$16.66 billion) of investor capital, and has already attracted demand of 150 times the number of shares on offer.

The company headed by CEO Wu Wenhui, in which Tencent has a 65.38 per cent stake, offered 151.37 million shares globally at an indicated range of HK$48 to HK$55 each. It has allocated 10 per cent of the offer to the public.

Applications for the public tranche closed at noon on Tuesday.

Infocast estimated its size of public orders for shares based on information from eight local brokers, including Bright Smart Securities, Haitong Securities, and Phillip Securities.

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Victor Au, chief operating officer at Delta Asia Securities, said the IPO would even outshine the recent listing of ZhongAn Online Property&Casualty Insurance in terms of public interest.

“It could become the hottest IPO this year in terms of the locked-in investor capital,” he said.

ZhongAn – the biggest fintech listing in Hong Kong history – locked up about HK$200 billion of capital in an offering in September that was nearly 400 times subscribed ahead of its September 28 debut, making it the most popular IPO this year at that time.

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Gaming equipment maker Razer, meanwhile, backed by Intel and Hong Kong’s wealthiest man Li Ka-shing,will also begin taking applications for its IPO on Wednesday. The company is hoping to raise up to HK$4.3 billion to fund acquisitions and development of gaming verticals.

Tan Min-Liang, Razer’s chief executive officer said on Tuesday he rates China as a vital growth market for the firm and that’s partly why it has opted to list in Hong Kong.

“We are particularly excited about the Chinese market,” Tan said, adding the company has been working with domestic gaming companies such as Tencent and plans to expand further with more investment in future.

“Hong Kong’s tech IPO market is heating up. Investor interest for tech stocks continues spiking,” Au said.

He added “Tencent’s brand effect” had played a major role in attracting investors to Razer’s impending IPO. In addition, Hong Kong stocks have gained significantly this year, partially boosted by capital flows from the mainland.

“The broad market sentiment is upbeat,” Au added, and he expects China Literature to price its IPO at the higher end of the indicated range, based on the huge interest from investors.

Shares in ZhongAn Online ended higher on Tuesday, meanwhile, rising 4.7 per cent to HK$78.70. The rally helped to pare a nearly 10 per cent drop over the past week.

“Part of the reasons [for the price drop] are that investors want to cash out and prepare for other IPOs. The highly anticipated China Literature IPO is drawing liquidity away from the market,” said Louis Wong Wai Kit, director for Phillip Securities and Phillip Capital Management.

China Literature is due to debut on the Hong Kong stock exchange on November 8.