How long can Hong Kong ride the IPO wave before it turns into the dotcom tsunami of 2000?
Analysts are unanimous in their view that today’s breed of tech companies will face the same upheavals that caused turmoil in the internet sector in 2000, where only the fittest survive
A record number of Chinese tech and internet companies are rushing to launch IPOs overseas this year, amid the looming shadow of overall tightening credit conditions, which bears a lot of similarities to the dotcom bubble and crash of 2000.
Just like what happened in the US nearly two decades ago, many of these IPOs are pushed by the need for cash amid intense funding pressure, as the cheap money era is coming to an end after the US Federal Reserve kicked off its rate-increase cycle and there is no sign of China ending its deleveraging campaign.
While it is getting increasingly harder to access onshore money from private equity funds, companies are turning to the public equity market for financing.
Some analysts said many tech start-ups are trying to catch the last train in the current cycle like what the Chinese internet portals did in 2000, as the issue of survival has become all the more important when winter finally comes. To grab the window of opportunity, many would rather risk a valuation cut and stock volatility.
If history is any guide, today’s breed of tech and internet companies could face a similar turnaround in fortunes and experience traumatic changes, leaving only the fittest to survive.
The great IPO rush
In Hong Kong, 13 Chinese tech and internet service-related IPOs launched this year, raising a combined US$6.86 billion as of September 21 – the highest on both counts since 1995, according to Dealogic data.