HONG KONG – Private investors in Hong Kong are bidding for shares in the Chinese short video platform Kuaishou Technology at a premium of up to 266% ahead of their market debut on Friday. This underscores the enormous appetite with which the company has broken records in IPO subscriptions.
Shares hit HK $ 322.80 on the gray market platform operated by Phillip Securities Group and HK $ 421 on Futu Securities, an online broker supported by Tencent Holdings, early Thursday evening. This is comparable to the stock’s issue price of HK $ 115, the high end of the range in which it has been marketed.
Kuaishou, also backed by Tencent, raised $ 5.4 billion in the IPO. If underwriters exercise their total allotment option, it will be the city’s largest IPO since August 2018, when cellular network infrastructure firm China Tower raised $ 7.4 billion.
Kuaishou is a rival to Douyin, the Chinese version of TikTok.
The gray market offering came after institutional investors traded small amounts of stocks up to HK $ 250 earlier this week, according to those familiar with the situation. Gray market platforms allow investors to bid for new stocks before officially trading on the stock exchange.
If the stock price jumps similarly at the start of trading on the Hong Kong Stock Exchange on Friday, it would be the best debut in the market for an initial public offering of at least $ 100 million, according to Dealogic.
“It has been a hot stock for retail and institutional investors from the start,” said Andrew Sullivan, director of Pearl Bridge Partners brokerage in Hong Kong.
“The short video format has been so successful in so many countries that the institutions are keen to present themselves,” he said. “It seems certain that there will be a strong official debut, but with much of retail demand being met by margin credit, investors could try cashing out before the Lunar New York holidays so further upside may be limited.”
The best debut crown is currently held by Chinese biotech company Ocumension Therapeutics, which gained 152% on its debut last year after raising $ 230 million.
The Hong Kong Stock Exchange will close at 12:00 noon on February 11th and reopen on February 16th.
The Kuaishou IPO drew 1.42 million applications from individual investors, or nearly one in five Hong Kong residents, according to an allotment notice. Investors placed a record $ 162 billion in stock orders – matching offers for the Ant Group’s demolition offer, which would have been the world’s largest IPO, and is equal to 1,204 the number of Kuaishou shares on offer
The company initially only offered 9.1 million shares, or 2.5% of total sales, to retail investors when it went public, but rose to 6% due to a deal clause that came into effect because the retail offering was more than 95 times oversubscribed.
The institutional portion of the IPO, which included commitments from 10 cornerstone investors totaling $ 2.45 billion, including BlackRock, Singapore-based investment firm Temasek and Fidelity, was subscribed 39 times, Kuaishou said.
Analysts say investors’ appetite for IPOs has been weakened by a desire to participate in fast-growing segments of the Chinese economy amid a flood of liquidity, cheap borrowing costs, and hopes that COVID-19 vaccines will increase the risk of dangerous assets .
Kuaishou marketed its shares in a range of HK $ 110 to HK $ 115 per share. That gave the company a valuation of $ 60 billion on the high end, the deal term sheet showed. If the underwriters took advantage of the 15% total allotment option, market capitalization could climb up to $ 61.7 billion.
That would be double what the video platform was at a year ago when it raised about $ 5 billion privately, according to people familiar with the transactions.
Kuaishou posted an adjusted loss of 7.2 billion yuan ($ 1.1 billion) for the first nine months of 2020 compared to an adjusted profit of 1.8 billion yuan for the same period last year after selling and marketing expenses as part of efforts to build your brand.
Revenues grew 49% to 40.6 billion yuan over the same period, according to the prospectus. The IPO proceeds will be used for research and development, acquisitions and building its ecosystem.
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