Tencent-backed Kuaishou Technology saw explosive demand from retail investors in its Hong Kong IPO, pricing the share sale at its top-end range to raise $5.4 billion.
Retail investors poured more than $60 billion via margin financing applications to “secure a small slice of the stock,” Reuters reported today, citing three sources. The reason for the big demand can be attributed to concerns over a so-called “asset bubble,” caused by the short squeeze rally of consumer electronics and gaming retailers GameStop (NYSE: GME), cinema giant AMC Entertainment (NYSE: AMC), as well as others.
Smaller investors will hope that the stock price surges on Kuaishou’s first day of trading. If not, they risk suffering a big loss if the stock plunges during the Chinese short-video platform’s debut. The company priced its IPO at HK$115 ($14.83) per share.
"There are the same risks here that we are seeing globally with things like GameStop, people get carried away and lose rationality," GEO Securities chief executive Francis Lun told Reuters in an interview.
He added, "The banks are fuelling this frenzy too. They put all their cash reserves into this IPO frenzy. There are no other areas where they can generate HK$400 billion ($52 billion) worth of loans so quickly and they earn interest from that."
After seeing huge demand, Hong Kong’s biggest bank HSBC upsized its “margin financing quota” to HK$200 billion from HK$150 billion, the news outlet reported, citing a spokeswoman.
The big IPO would become Hong Kong’s largest IPO since the Asian unit of brewing giant Anheuser-Busch InBev (NYSE: BUD) known as Budweiser Brewing Company (HKEX: 01876) raised $5.8 billion in 2019. In addition, Kuaishou’s IPO would become the world’s biggest since Saudi Aramco’s record-breaking primary listing in December 2019, which brought in $29.4 billion. That of course assumes there are no last-minute suspensions as we’ve seen with Ant Group in the fourth quarter or other factors. Kuaishou is scheduled to make its debut on Feb. 5.
Bank of America Securities, Morgan Stanley, and China Renaissance are the joint sponsors on the deal. If the underwriters express their over-allotment option, Kuaishou could fetch as much as $6.2 billion from the share sale.