The startup behind a TikTok-style video app rocketed in its Hong Kong market debut, making the latest demonstration of investor hunger for initial public offerings and for high-growth technology companies.
Shares in Kuaishou Technology nearly tripled from their IPO price in early trading Friday, implying a market value of more than $160 billion, versus nearly $61 billion when the share sale was priced.
Kuaishou is backed by the Chinese tech giant Tencent Holdings Ltd. TCEHY 1.48% and competes with ByteDance Ltd., the closely held Chinese firm behind TikTok and its domestic sister app, Douyin. The $5.4 billion initial public offering is the world’s largest in more than a year, according to Dealogic.
The offering 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, the bottled-water group Nongfu Spring Co. jumped in its market debut, while the abortive dual listing of Ant Group Co. in Shanghai and Hong Kong generated trillions of dollars of demand.
In Friday morning trading, Kuaishou’s stock nearly tripled to 320.20 Hong Kong dollars a share, compared with an IPO price of HK$115, equivalent to $14.80. The surge echoed a huge leap in gray-market trading on Thursday afternoon.
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.
Friday’s rise, if sustained through the close, would make Kuaishou one of the best-performing larger market debuts in Hong Kong, according to Dealogic data tracking IPOs since 1995 of at least $1 billion.
To date, the biggest first-day gains for major Hong Kong IPOs were enjoyed by Alibaba.com Ltd., which nearly tripled in its debut in 2007, and the vaping-technology company Smoore International Holdings Ltd. , which more than doubled in July 2020.
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.
The enthusiastic reception for Kuaishou bodes well for ByteDance, its bigger unlisted rival. ByteDance was last valued at $180 billion in December, after it raised $2 billion from investors including Carlyle Group and Sequoia Capital China, according to PitchBook. Media reports have said ByteDance was considering listing Douyin in Hong Kong.
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 gray-market trading Thursday, 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.
Write to Joanne Chiu at [email protected]
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