Tencent-backed Yixin, Hong Kong’s 10th hottest IPO, disappoints in debut
But the online car retailer’s CEO believes Yixin’s flotation can help Hong Kong achieve its ambition of becoming a tech IPO hub
Shares of Yixin Group, China’s biggest online car retailer, had surrendered most of their early gains by Thursday’s close in Hong Kong, disappointing market watchers who had anticipated a blockbuster debut.
The company, which is backed by Tencent and JD.com, raised HK$6.77 billion (US$870 million) by selling 879 million shares in its IPO,the third largest in terms of funds raised by an internet business in the city this year. Yixin priced the shares at HK$7.7 apiece, the top end of an indicative range of HK$6.6 to HK$7.7, as investors eye the rapid rise of vehicle e-commerce clamoured to get their hands on the stock.
The retail portion of the IPO was 560 times oversubscribed, attracting HK$382 billion of investor capital, making it the 10th most sought-after IPO in the city’s history.
Hopes were high as the stock got off to a thunderous start on Thursday morning, opening at HK$10 and jumping as much as 32 per cent to HK$10.18.
But it had trimmed those gains to 5 per cent by the end of the session, closing at HK$8.12. That price gives Yixin a market capitalisation of HK$51 billion.
“The stock performance is a little disappointing, ” said Alex Wong, director of asset management at Ample Financial Group.
“I think investor sentiment may have been affected by recent hot tech IPOs, whereby shares surged initially amid enthusiasm, but then when the frenzy receded, the stock price pulled back and the trading turned more quiet.
“Many investors who got their allotment of Yixin shares will have wanted to take profit immediately on the first day, as they have learned the lessons from previous experiences.”
Still, Yixin’s stock was the second most heavily traded in the Hong Kong market, after Tencent Holdings, with 833 million shares worth HK$7.4 billion changing hands.
“We are pleased with the stock performance,” CEO Andy Zhang Xuan on Thursday in Hong Kong. “But we’ll also treat it with a calm mind and focus on developing our business.”
ZhongAn Online Property & Casualty Insurance, the largest technology listing in Hong Kong this year, peaked at HK$93.65 a week after its debut on September 28, more than 50 per cent above its IPO price. The stock has pulled back since then, closing Thursday at HK$74.65, down 20 per cent from its peak.
Victor Au, chief operating officer for Delta Asia Securities, said Yixin as a car retailing platform could face more pressure from rivals, as it is relatively easy for competitors to enter the industry.
China Literature, the country’s largest e-book site and online publishing house, started trading last week after becoming the hottest IPO in Hong Kong this year.
Au said the e-book site has the advantage of being able to generate profit from more than just charging readers for accessing its content on the site. It can develop TV, film, and other entertainment products based on the intellectual property it owns.
Zhang said Yixin chose Hong Kong as a listing destination because the city attracts both overseas and mainland Chinese investors. Many of the investors are also familiar with emerging companies, and therefore have a good understanding of Yixin’s business model.
“In the future, we will continue to work with Tencent, which is one of our shareholders,” he said.
Zhang said the company plans to launch cars connected to the internet of things (IoT) in the future. These will be able to display content on the cars’ screens from its shareholders, including e-books from Tencent’s China Literature, music from Tencent’s QQ Music, and Baidu’s map service.
Zhang also believes Yixin’s flotation could attract more Chinese technology firms to list in Hong Kong, which could help make the city a hub for tech IPOs.
Spun off from Bitauto in 2014, Yixin derives its revenue mainly from providing a marketplace for car transactions and acting as an intermediary for consumers to get car loans. It also has its own automotive finance and leasing business.
The company reported revenue of 1.55 billion yuan (US$233.8 million) in the first half of 2017, up 240 per cent from a year ago. Adjusted net profit reached 261 million yuan, a nearly eightfold increase from the same period last year.
With additional reporting from Karen Yeung