(WSJ) Shares in Kuaishou Technology surged in gray-market trading ahead of the Chinese video-app operator’s Hong Kong debut, after investors placed about $370 billion of orders for the $5.4 billion deal.
Kuaishou competes with ByteDance Ltd., the closely held Chinese firm behind TikTok and its domestic sister app, Douyin. The initial public offering is the world’s largest in more than a year, according to Dealogic, and gives the company a market value of nearly $61 billion.
This is the latest in a string of hot IPOs in Hong Kong, many involving Chinese technology startups or other companies catering to China’s increasingly affluent consumers. Last year, for example, bottled-water group Nongfu Spring Co. jumped on its debut, while the abortive dual listing of Ant Group Co. in Shanghai and Hong Kong generated trillions of dollars of demand.
Kuaishou earlier priced the stock sale at 115 Hong Kong dollars a share, equivalent to $14.84 a share. Unofficial gray-market pricing Thursday suggested Kuaishou’s stock could leap in value when it starts trading Friday. The stock closed at HK$336.60 a share on a trading platform operated by Futu Securities, almost triple the IPO price.
Joe Chang, a manager at an e-commerce company in Shenzhen, said he was allotted just 100 shares after placing an order for 50,000, and that he used borrowed money for 90% of the total. Mr. Chang said he liked the company as a market leader in short video and live-streaming, and because rival ByteDance is unlisted. He said Kuaishou’s market value could rise to $150 billion.
Andy Maynard, head of equities at China Renaissance Securities, said institutional investors also valued IPOs like this as a way to invest in China’s new economy, which offered growth potential and was relatively insulated from global economic conditions.
More than 1.4 million individuals placed $163 billion of orders for Kuaishou’s IPO, figures from the company showed, while institutional investors placed orders of 39 times the share originally offered to them, implying about $206 billion of orders. The strong demand from individual investors lifted the share of the deal reserved for them to 6% from 2.5%, thanks to a so-called clawback mechanism.
Investors appeared unfazed by a recent intervention from the China Audio-Video Copyright Association, which earlier this week demanded Kuaishou delete 10,000 videos from its platform over alleged copyright infringements. The government-backed body said it had found more than 150 million Kuaishou videos using unauthorized background music. A Kuaishou representative had no immediate comment.
Low interest rates and strong post-debut trading performances have drawn small investors to bet on Hong Kong IPOs. They often borrow from banks or brokers to make their order up to 20 times bigger, which boosts their chances of getting shares. Many flip the stocks for a short-term gain in the first few days of trading.
Graham Chin, a 26-year-old who makes YouTube videos about investing and finance, said he saw Kuaishou as a unique investment opportunity. However, he wasn’t able to secure any shares, despite placing an order worth about HK$575,000, the equivalent of $74,175.
Huang Xiaohu, a 35-year-old tech entrepreneur in Shenzhen, managed to obtain 100 shares. He said he sold those at HK$365 each in the gray market, reaping a profit of about $3,200, excluding fees and interest costs. “It’s a new-economy stock with rapid growth potential, but I’m very satisfied with the gain,” said Mr. Huang.
Source: Wall Street Journal by Joanne Chiu
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