Several Newly-Listed Unicorns See Shares Slide in Hong Kong
Liao Shumin
DATE:  May 23 2018
/ SOURCE:  Yicai
Several Newly-Listed Unicorns See Shares Slide in Hong Kong Several Newly-Listed Unicorns See Shares Slide in Hong Kong

(Yicai Global) May 23 -- An array of new economy unicorns have seen their share prices slide following their initial public offerings in Hong Kong, with some even seeing their market capitalization half compared with their peak price.

China Literature Ltd. [HKG:0772], Zhongan Online P&C Insurance Co. [HKG:6060], Yixin Group Ltd. [HKG:2858], Razer Inc. [HKG:1337], and Ping An Healthcare and Technology Co. [HKG:1883], five stocks considered as China's top five new economy firms, and much-sought after during their IPOs. However, with the exception of China Literature, the firms' share prices are all lower than issue prices at present.

As of May 21, the total market value of the above five companies has shrunk by more than HKD170 billion as compared to the previous highs.

China Literature, a cultural and creative industry company controlled by Tencent Holdings Ltd., once traded at as high as HKD100 per share and its market cap was close to HKD100 billion at that time. However, the company's share price has dived nearly 40 percent.

Internet insurer Zhongan Online P & C Insurance, with a peak price of HKD97.8 after listing (following an issue price of HKD59.7), closed at HKD53 on Monday and its current market cap has halved from the highs of HKD140 billion.

The Internet auto retailer Yixin Group was listed at the issue price of HKD7.7, and its share price on the first trading day touched HKD10.18. However, the retailer's stock price has fallen away since then, tumbling by around 60 percent at present.

Razer is an e-Sports concept stock with a previous market cap of up to HKD50 billion. However, the company's share price has continued to drop from the highest level of HKD5.49, plummeting more than 56 percent up to now. 

Ping An Healthcare and Technology, an Internet medical care company listed this month, closed at a price lower than its issue price on the second trading day after listing, with its current market value falling more than 10 percent from its highest level on the first trading day.

Of the 83 new stocks listed in Hong Kong's equity market this year, 50 of them have seen their share prices drop below their offering prices, a report from Wind Data shows. Over 14 of the stocks have declined more than 35 percent and 41 stocks have decline more than 10 percent compared with their offering prices.

Technology giant Xiaomi Inc., which applied to HKEX for listing earlier this month, is also directly affected by a decline of fever in unicorn. An institutional investor expected Xiaomi's valuation to reach around USD70 billion, lower than the market expectation of USD100 billion.

Hong Kong's equity market started last year to ease requirements in its new stock listing system by deregulating listings of new economy stocks, which may be favorable for unicorns. However, at a time when more and more companies are launching IPOs in Hong Kong, share prices have fallen below offering prices and inflated share prices and more bubbles are key factors.

Judging from the new economy stocks that saw their share prices fall below their offering prices, their profits are not enough to support their excessively high valuations, which is a direct driver of share price falls in unicorns below their issue prices.

Changes to the external investment environment is also a reason that unicorns saw a share plunge this year: On the one hand, intensified expectations on Fed's rate hike led USD to go strong and massive funds of flow back to the United States; on the other hand, the Hong Kong's equity market led gains among the world's main capital markets last year, resulting in a strong sentiment in profit-taking and risk hedging. 
Editor: William Clegg

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Keywords:   Hong Kong Stock Exchange,New Economy,Unicorn