IPO Market Starts To Show Cracks As Tech Deals Falter

 IPO stock photo | by lendingmemo_com
Image Source: LendingMemo.com

Caught between the rock of Xi Jinping tracking down on local tech companies (see "China Considers Creating State-Backed Company to Oversee Tech Data") and the hard place of the continued dumping by Archegos of various Chinese tech blocks, Bloomberg's Julia Fioretti notes that "the cracks are appearing in Asia’s tech listings boom."

The latest to disappoint was US-traded Chinese video-streaming service Bilibili in Hong Kong, which closed 1% lower on Monday after raising $2.6 billion in a secondary listing in the city. Bilibili’s coming-out party in Hong Kong was hurt by a revived delisting threat of Chinese companies over stricter U.S. audit inspections, as well as regulatory clouds out of China.

Meanwhile, Chinese fintech firm Linklogis is due to price its IPO of as much as $1.1 billion in Hong Kong on Wednesday, providing further clues on investor appetite.

These deals come as debuts lose their shine. Companies that have raised at least $200 million from listings on Asian exchanges this year have posted an average first-day rise of 70% but a month after going public, they were just up 43% from their offer price, data compiled by Bloomberg show. Compare this to the second half of 2020, when market debutantes were up 60% in their first month, with an average first-day gain of 51%.

As Fioretti notes, it could be argued that some of the muted performances isn’t a bad thing: eye-popping gains by IPOs by Kuaishou Technology and Yidu Tech earlier this year were seen as signaling frothiness. After closing 161% above its IPO price in February, short-video service Kuaishou gave up some of the gains and is now trading at 130% above its issue price. Yidu Tech is just trading 37% above its IPO price after surging 148% on its debut.

But in a major hit to sentiment, the unprecedented spree of block trades in the U.S. as a result of the forced sale of Archegos' holdings further hit sentiment towards the Chinese tech sector. Chinese tech giant Baidu ended its Hong Kong debut last week flat and has since slumped 20%. Its U.S. shares were among the $2.64 billion of stock offloaded on Monday in connection with the wind-down of Bill Hwang’s Archegos Capital Management.

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