(Yicai) July 30 -- China’s Zhongji Innolight, the world's largest producer of optical transceivers and interconnect solutions, sank below its offer price on its first day of trading in Hong Kong, after raising about HKD53.4 billion (USD6.8 billion) in the city’s biggest listing for nearly seven years.

Innolight’s shares [HKG: 3308] closed 2 percent lower at HKD960 (USD122.38) each today, versus the HKD980 offer price. Amid a selloff in Chinese mainland equities as investors ditch global technology stocks, its Shenzhen-listed stock [SHE: 300308] ended down 9.2 percent at CNY864 (USD127.83), after diving by as much as 16.6 percent to CNY793.03, the lowest since April 16.

Innolight’s strong rally in Shenzhen during the first half of this year is also an important reason why it fell in Hong Kong. Driven by surging demand for its products and rapid earnings growth, the stock reached a record high of CNY1,416.88 (USD 209.45) on June 22, but has sunk by about a third since then. Even so, as of the close on July 29, the shares were still up around 56 percent year-to-date and about 353 percent over the past 12 months.

The company sold 54.5 million Hong Kong shares, with the offer price representing an almost 3 percent discount on the marketed upper price limit of HKD1,010 and a roughly 21 percent discount on its July 27 closing price in Shenzhen.

The highly anticipated secondary listing, Hong Kong’s biggest since Alibaba Group Holding’s in November 2019, drew dozens of prominent cornerstone investors, including Temasek, Abu Dhabi Investment Authority, CPP Investments, BlackRock, J.P. Morgan Asset Management, Wellington Management, Alibaba, and Tencent Holdings.

After the sharp price correction since June 22, Innolight unveiled a CNY4 billion to CNY8 billion (USD591.2 million to USD1.2 billion) plan to repurchase its own Shenzhen-listed shares. Buybacks are generally aimed at buoying a company’s stock price by removing some of its shares from the market. 

“The launch of the share repurchase scheme is clearly tied to the Hong Kong listing,” said Ng Laiyin, a strategist at Everbright Securities International. “Innolight intends to halt the share price decline in Shenzhen to shore up confidence among Hong Kong investors, and underpin the post-listing performance in Hong Kong.”

Thirty-five percent of the Hong Kong raise’s proceeds will go to research and develop optical interconnect solutions, 30 percent to grow Innolight’s global capacity to produce high-speed optical transceivers, 15 percent to supply chain acquisitions and investments, 10 percent to enhance supply chain resilience, and the rest to supplementing working capital, the prospectus showed.

Driven by surging demand for artificial intelligence computing power, the global optical module market is undergoing unprecedented high-speed growth. The global data center optical module market will reach USD22.8 billion this year and hit USD41.4 billion by 2030, according to US-based market research and data analysis firm LightCounting.

Editors: Tang Shihua, Futura Costaglione