Wave of selling at end of Xiaomi’s lock-up period raises questions about what’s ahead for other newly listed firms in Hong Kong

Investors locked into holding newly listed Hong Kong stocks could only watch as last year’s bear market ate away at their returns. The shackles will soon be off.

Xiaomi Corp. saw a wave of selling after its lock-up period – when key investors are banned from selling stock – ended three weeks ago. Similar restriction terms are due to end for China Tower next month, followed by Meituan Dianping and Haidilao International Holding in late March. They’re among more than 50 companies whose mandatory holding periods are yet to expire in Hong Kong this quarter, according to data compiled by Bloomberg.

The city was host to the world’s busiest venue for initial public offerings in 2018. But a market rout has put the onus on their sky-high valuations, making it more likely that early shareholders will exit as soon as they are able.

“Venture-capital investors pressured tech companies to come to market last year, and there was a very strong pipeline with very high multiples across the board,” said Travis Lundy, a special situations analyst who publishes on Smartkarma. “Now that is coming out.”

China Tower’s expiry on February 8 will unlock shares owned by its 10 cornerstone investors, including Hillhouse Capital, Och-Ziff Capital Management Group and Alibaba Group Holding. They bought a combined US$1.4 billion of shares in the IPO. Early investors in Meituan Dianping will be able to sell come March 21 – the food delivery giant attracted five backers who bought $1.5 billion of the stock in the offering. (Alibaba in the parent company of the South China Morning Post.)