Hong Kong’s most overbought IPO Nongfu Spring gushes on debut, pushing founder to among China’s newly minted billionaires
- Company’s shares surged 85 per cent in early trading from IPO price of HK$21.50
- Debut made Nongfu founder Zhong Shanshan one of China’s richest people
The company, which is based in China’s eastern city of Hangzhou, saw its shares surge 85 per cent to HK$39.80 in market debut from an initial public offering price of HK$21.50. As many as 224.9 million shares valued at HK$8 billion (US$387 million) changed hands on the company’s first trading day.
The stock, however, failed to replicate a 105 per cent jump achieved on Monday, in the so-called grey market trading before its formal debut. It gave up some of the early gains to end the day 54 per cent higher at HK$33.10.
The flotation has added about HK$313 billion in paper wealth to 65-year-old Zhong’s wealth, based on the close price of Nongfu shares. The billionaire controls 9.4 billion shares, or 84 per cent, of the company. He holds a 17 per cent direct stake in Nongfu and controls another 67 per cent through Yangshengtang, a company entirely owned by him.
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Zhong is also the biggest shareholder of Beijing Wantai Biological Pharmacy Enterprise, a maker of Covid-19 test kits that went public in Shanghai in April. His 75 per cent stake in that company was valued at 64 billion yuan (US$9.4 billion) based on Tuesday’s closing price.
When the stakes in both listed companies are combined, Zhong’s wealth stands at about US$50 billion. That puts him in one of the top three spots for China’s wealthiest people, whose net worth can fluctuate with changing stock prices.
Pony Ma Huateng, the chairman of internet giant Tencent Holdings, is estimated to be worth US$56.7 billion and is China’s richest person, according to Forbes. Trailing him is Jack Ma, founder of Chinese e-commerce giant Alibaba Group Holding, and his net worth is estimated to be US$51.4 billion. Alibaba owns the South China Morning Post.
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Investors piled into Nongfu Spring on hopes that company will capitalise on a rising demand for healthier drinks in China with its strong branding.
Zhong founded the company in 1996 at Qiandao Lake in Zhejiang province, which is known as one of China’s largest and cleanest water reservoirs. Nongfu Spring became famous through its ad campaigns that promoted its water as natural water containing natural minerals, differentiating itself from regular purified water sold by other producers at the time.
“Tastes a bit sweet”, its marketing slogan, has become very popular over the years. Its company name, which translates into “Farmer’s Spring”, further reinforced its association with nature and health.
Since 2000, the company has diversified into selling flavoured water, tea and juice. Last year, it started selling coffee as well, under its Tanbing brand.
“The company has dominated consumers’ psyche with its concept of ‘natural’, and opened up a whole new market with its differentiated products,” Xia Tian, an analyst at Guosen Securities, said in a research report on Tuesday. Guosen Securities assigned a “buy” recommendation to the stock and set a target price of HK$36.50.
Nongfu Spring’s market value stood at about the equivalent of US$48 billion. That puts it ahead of regional peers such as Japan’s Suntory Beverage & Food, which has a market value of 1.2 trillion yen (US$11.2 billion), and Ito En, whose market cap is 648 billion yen.
However, it still has a long way to go before it can catch up with global beverage giants such as Coca-Cola, which has a US$249 billion market cap, and PepsiCo, which is valued at US$192 billion.
(Corrects value of transactions in the second paragraph)
