IPO Market Starts To Show Cracks As Tech Deals Falter

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.

An overall rotation out of technology into value and cyclical shares benefiting from a global economic rebound is also taking a toll on the sector. As a result, more companies are trading under water weeks in 2021. This year, 29% of companies that raised at least $200 million with one month of trading under their belt in Asia have dropped below their offer prices, up from 22% in the second half of last year, the data show.

Still, there are bright spots. Artificial intelligence software company Appier Group Inc. jumped 19% on its Tokyo debut on Tuesday after pricing its $271 million IPO at the top of the range, showing investors aren’t completely retreating from tech.

Here is a snapshot of some upcoming listings:

Bairong

• Hong Kong stock exchange
• Size $507m
• Listing March 31
• Morgan Stanley, CICC, CMBC Capital

Linklogis

• Hong Kong stock exchange
• Size up to $1.1b
• Pricing March 31, listing April 9
• Goldman Sachs, CICC

Archi Indonesia

• Indonesia stock exchange
• Size about $300m
• Pre-marketing March 12-26
• Citi, Credit Suisse

Smart Share Global

• Nasdaq
• Size up to $219m
• Pricing March 31
• Goldman Sachs, Citi, China Renaissance

Top Glove

• Hong Kong stock exchange
• Size up to $1.9b
• Filed Feb. 26
• CICC

Gateway Strategic Acquisition Co

• NYSE
• Size $300m
• Credit Suisse, Citi
• Filed March 24

Hony Capital Acquisition Co

• NYSE
• Size $300m
• Citi, Credit Suisse
• Filed March 24

Artisan Acquisition Corp.

• Nasdaq
• Size $300m
• Credit Suisse, UBS
• Filed March 24