Ambitious China fintech IPOs disappoint investors
Huifu and Vcredit achieve aggressive financing goals in Hong Kong, but fare weakly in secondary trading.
Two China fintech companies have successfully raised capital in Hong Kong listings, but investor enthusiasm for these plays has subsequently been tempered, with secondary trading poor.
Huifu Payment (stock ticker 1806) and Vcredit Holdings (2003) both listed on the main board of Hong Kong Exchange and Clearing in the past two weeks, leading the charge for a growing line of similar, smaller-sized companies eager to raise international capital.
Both companies reached their funding goals. But both stocks saw their prices decline on the first day of trading, prompting admonitions from analysts that the pricing strategies has not left enough on the table for investors.
Huifu Payment listed on Friday, June 14, and raised about $200 million at HK$7.5 per share, midway between its target price of HK$6.5 and HK$8.5. But on its first day of trading, it opened at HK$6.89 per share, 6.9% below its IPO price, and closed that day at HK$6.62.
By Friday’s close last week, the price had yet to reach its IPO level. The IPO was nine times oversubscribed.
Huifu Payment is a niche mobile payment provider with 2% market share, behind Alipay and Tencent Pay. The lack of listed comparisons allowed it to set an aggressive pricing benchmark upon its debut.
Vcredit, which provides refinancing to people with credit-card debt, has done a little better. It listed on June 21 at HK$20 per share, raising about $175 million. It managed to open on its first trading day at the same level, only to see its share price decline. It did however see its share price return to HK$21.05 by the end of the week.
But the wobbly performance still suggests its IPO was priced too high, as investors have merely treaded water.
Michelle Li, head of research at AMTD Group in Hong Kong, says the companies’ pricing was too aggressive because they are too small in their fields, and they aren’t profitable enough; Huifu Payment does make a small profit but it was priced for perfection.
She says, however, that these listings shouldn’t spoil the broth for future fintech listings in Hong Kong, but companies will need to leave more upside for investors. “Companies need to be more conservative in pricing,” she said. “They need to think about whether their business model is stable” and delivers sustainable profits.
Huifu’s joint sponsors were CLSA and J.P. Morgan.
Vcredit’s joint sponsors were Credit Suisse, Goldman Sachs and J.P. Morgan.