On the afternoon of June 29th, according to IFR, Xiaomi’s IPO was priced at HK$17 and was located at the low end of the HK$17 to HK$22 IPO range.
As the first new economic company with different rights to land on the Hong Kong market, Xiaomi's IPO sales are cold.
“Because the previous few new economic stocks did not perform well in the listed share price, and the customer’s subscription enthusiasm was not high, we put a price limit on the single price of 18 Hong Kong dollars. It is understood that many institutions are buying at a price limit, Xiaomi eventually Pricing may not be in the medium cap."Stock baseKim disclosed to the 21st Century Business Herald.
Xiaomi’s initial public offering in Hong Kong sold 2.18 billion shares, 65% of which were new shares and 35% were old shares. The price of each offer will be between HK$17-22 and HK$37.06 billion-47.96 billion. The amount of funds raised will be 37.06 billion -47.96 billion Hong Kong dollars. Xiaomi plans to officially list on the Hong Kong Stock Exchange on July 9.
Since the end of October, many high-tech stocks have landed in Hong Kong stocks. IPO subscriptions in the Hong Kong market have been very hot. Due to the extremely low success rate of hot new stocks, in order to increase the hit rate of “playing new”, retail investors generally conduct financing transactions through brokers, which is commonly known as margin subscription. Typically, retail investors can use 10% of the principal to finance 90% of the brokerage and pay other charges such as interest.
According to industry insiders, the subscription of new shares in the Hong Kong stock market will generally be divided into two groups A and B. Individuals who usually subscribe for one or two hands will be classified as Group A, while the number of applications for Group B will be tens of thousands of shares, most of which are Institutional investors, or retail investors, subscribe for it.
However, the rush of new retail stocks in the past by retail investors did not happen this time. Xiaomi officially launched the IPO and the market reacted coldly for two consecutive days. According to Hong Kong media reports, on June 25th, 11 Hong Kong local brokerage companies recorded a margin subscription amount of only HK$7,472 million, which was calculated based on the amount of HK$2.398 billion raised in Hong Kong public offering, and oversubscription only 2.12 times. On June 26th, 10 local brokers accumulated a total of HK$5,944 million in margin subscriptions, oversubscribed 1.48 times, far behind market expectations.
In contrast, since the fourth quarter of last year, there have been at least five new economic stocks in Hong Kong IPOs, of which the reading group recorded a margin subscription amount of HK$135.2 billion on the first day of the IPO, and the Hong Kong Public Offering was oversubscribed by 624.95 times. The public offering of a hand-signed rate of only 7.72%. Yi Xin, Zhong An Online and Razer had more than 100 times the first day's show.
"The performance of Xiaomi's IPO is obviously worse than market expectation. As a number of new economic companies line up to list in Hong Kong, the theme of this sector is no longer scarce and the pressure on valuation will increase, and it is very likely that the price range will be Lower-limit pricing, and Xiaomi’s profit model has not yet been proved, the valuation has exceeded the top international high-tech companies, including Apple, Tesla, etc.” Hong Yin, chief strategist at Bank of Communications, interviewed in the 21st Century Business Herald reporter Frankly.
Secondary market performance is poor
Recently, many "Unicorn" companies listed on the Hong Kong stock exchange have been lackluster after listing.
Zhang Zhiwei, an associate director of Prudential Securities, frankly stated that since the beginning of this year, the stock prices of three representative new economic stocks, Wenwen Group, Yixin and Zhongan Online, have continued to fall sharply, leaving investors with a fear.
The above fund managers also pointed out: “After the listing of Ping'an medical doctors, they encountered Waterloo, which also caused many investors to worry about Xiaomi’s post-listing performance. Moreover, Xiaomi’s valuation is high, and investors’ overall sentiment is cautious.”
Take Ping An doctor as an example, the listing price stability period officially ended on May 26, and the market closed down by 3.2% on the following day. Compared with the highest point of 58.7 Hong Kong dollars on the day of the listing, the stock price fell 20%, compared with the 54.8 Hong Kong dollar IPO price, it evaporated 14%. As of the close of June 27, Ping An's doctor's share price fell to HK$49.65 per share.
ZhongAn Online, as the country's first Internet insurance company, was listed in Hong Kong at the issue price of HK$59.7/share from September 28 last year. The initial stock price surged in the initial public offerings. It soared to a high of HK$97.8 during the session and the market value was once as high as RMB140 billion. Hong Kong dollar. However, the picture was not long. As of the close of June 27, Zhong An Online had dropped to HK$49.5 per share, and the market value had shrunk dramatically to HK$23.56 billion.
On November 8th last year, Tencent’s Wenwen Group was listed on the Hong Kong Stock Exchange. The stock price once stood at HK$100 and the market value was close to HK$100 billion. On June 27th, the intraday price was HK$71.9/share, the market value dropped to HK$64 billion and evaporated nearly HK$40 billion.
Profit model to be tested
Market participants pointed out that these new economic stocks are unavoidable due to the lack of substantial profits to support the high valuation.
Taking Xiaomi as an example, Lei Jun pointed out at the June 25 press conference that: "In the past eight years, many rounds of private equity financing, investors have given us a very high valuation, and the valuation of that round three years ago has reached 45 billion US dollars.” He stressed that Xiaomi’s profit model is to rely on cost-effective hardware, gather a large number of users, and realize the realization of the Internet service model. However, according to a prospectus submitted by the company, smart phone sales are still the main source of income for Xiaomi. In the past three years, the total revenue contributed by smart phones accounted for 80.4%, 71.3% and 70.3%, respectively.
Ping An Hao doctor has continued to lose money since its establishment. The net losses from 2015 to 2017 were 324 million yuan, 758 million yuan, and 1.02 billion yuan respectively.
Razer as the world's first e-listing listed company, one of the focuses of the market is when it can turn a profit. According to the prospectus, as of the first half of last year, the company’s operating loss reached US$55.96 million, and the losses in the first two years were US$12.08 million and 63.13 million, respectively.
“Since the market conditions of the Hong Kong stocks have continued to deteriorate recently, investors’ enthusiasm for new share subscriptions has cooled, and the limited stock funds in the Hong Kong stock market have also had a negative impact on Xiaomi’s IPO.” Guo Jiayao, chief strategist at China Yinsheng Wealth Management 21st Century Business Herald reporter said.
As of the close of June 27, the Hang Seng Index closed at 28,356 points, down 525 points or 1.8%, and fell 982 points or 3.3% for three consecutive trading days, the lowest since December 7 last year.
As the Fed speeds up the pace of interest rate hikes, Hong Kong Interbank Offered Rateinterest rate(HIBOR) has continued to climb, and the capital cost of investing in Hong Kong stocks continues to increase. According to the data of the Hong Kong Treasury Market Association, on June 27, overnight, one-month and three-month HIBORs rose to 1.25214%, 2.01919%, and 2.08964%, respectively. The three-month rate has risen for 14 consecutive trading days, setting a new high since 2008.
At the same time, the southbound capital of “Hong Kong Stock Connect” has also significantly slowed down. According to the data obtained by our reporter, in the last 15 trading days, Hong Kong stocks recorded a net outflow for 5 trading days, with a cumulative amount of 5.915 billion yuan. (Source: 21st Century Business Herald)
(Original title: Millet IPO is priced at HK$17 at the low end of the HK$17 to HK$22 IPO range)