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IPO

IPO

China Renaissance, key adviser on tech IPOs, plummets on Hong Kong stock market debut

A record number of Chinese tech firms have listed in Hong Kong this year, only to see their shares slip amid a sluggish stock market

PUBLISHED : Thursday, 27 September, 2018, 10:51am
UPDATED : Thursday, 27 September, 2018, 10:54pm

China Renaissance, a major adviser to and investor in Chinese technology IPOs, slumped on its own Hong Kong trading debut on Thursday.

The Beijing-based investment bank, which advised on the flotation of e-commerce site JD.com among others, fell 22 per cent to close at HK$24.70, compared with its IPO price of HK$31.80. The market value stood at HK$13.5 billion.

A record number of Chinese tech firms have listed, or applied to list, in Hong Kong this year. But many of those that have already debuted have seen their share price drop amid a sluggish broader stock market.

China Renaissance had priced its stock at the lower end of the price range, raising HK$2.7 billion (US$350 million) in its Hong Kong IPO.

The international tranche of shares – 90 per cent of those offered – was overbought by about four times, according to sources familiar with the deal. However, the retail portion was undersubscribed.

China Renaissance’s IPO came amid a rush of Chinese technology companies seeking to raise funds on overseas bourses.

By the end of last week, 13 Chinese tech and related companies had made their stock market debut in Hong Kong this year, raising a combined US$6.86 billion. The number and the value were both the highest on record since 1995, according to data compiled by Dealogic.

Nonetheless, the stock market has remained sluggish amid concerns around the US-China trade war, currency turmoil in emerging markets and fear of further interest rate increases.

The Hang Seng Index ended down 0.4 per cent at 27,715.67 on Thursday.

It recently entered a technical bear market, reaching a low of 26,613 earlier this month, down more than 20 per cent from a high of 33,484 on January 26.

Founded in 2004 by Bao Fan, a former Morgan Stanley and Credit Suisse banker, China Renaissance has advised on and invested in a number of high-profile mergers and acquisitions by Chinese technology start-ups, including those between Meituan and Dazhong Dianping and between Didi and Kuaidi, as well as the acquisition of Mobike by Meituan.

It lined up US$125 million from three cornerstone investors for its IPO.

Where do blockbuster IPOs stand as the fizz goes out of Hong Kong’s stock trading debuts?

Online payments company Ant Financial, which operates the Alipay cashless payments business controlled by Alibaba Group Holding, has agreed to invest US$50 million. Alibaba owns the South China Morning Post.

Snow Lake Funds, an Asian alternative investment manager, will put in US$50 million, and LGT Group Foundation, a European private wealth and asset management firm, will invest US$25 million.

The company currently has three principal business lines – investment banking, investment management, and its Huajing Securities unit, an onshore securities platform that has licences to offer underwriting, sales, trading, brokerage, and asset management services on the mainland.

Bao controls around 63 per cent of China Renaissance. Neil Shen Nanpeng, founder and managing partner of Sequoia Capital China, owns 7.5 per cent, and Li Shujin, founder and managing partner of Trustbridge Partners, holds a 7.7 per cent stake.

The company’s adjusted revenue increased by 48 per cent in 2017 to US$212 million. In the first quarter of this year, its adjusted net profit reached US$35.67 million, a fivefold increase from the same period last year, thanks to growth in its investment banking and investment management businesses.

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