Shares of Bairong Inc. (HKEX: 06608) plunged as much as 16% in its debut Wednesday in what was the worst debut among Hong listings in three years.
The Chinese fintech platform, which provides artificial intelligence, hit a low of HK$26.65 and then ended its day trading at HK$26.70 per share. Both prices were 16% lower than its IPO price of HK$31.80 each.
According to Bloomberg, Bairong’s first day of trading was the worst among Hong Kong IPOs that have fetched more than $500 million since 2018. In total, Bairong raised $507 million in its IPO.
The poor first day of trading comes after the weak recent debuts of big secondary listings of Chinese tech giants Bilibili (Nasdaq: BILI; HKEX: 09626) and Baidu (NYSE: BIDU; HKEX: 09888). Both listings raised a cumulative of around $5.7 billion.
Some of the unease among investors comes from the recent trade tensions between Washington and Beijing.
This month, trade tensions worsened after a verbal battle between the two sides in Alaska. In addition, the U.S. Securities and Exchange Commission has just adopted interim final amendments to implement measures under the Holding Foreign Companies Accountable Act, a bill that could delist Chinese companies from U.S. exchanges.
On the other side of the pacific, fintech has been under scrutiny since Chinese regulators suspended Ant Group’s mega IPO, which would have set a new record. Chinese regulators are reviewing the payments, online lending, and insurance tech spaces.
"The sentiment for IPOs has cooled down a lot after the recent correction," Kenny Wen, a strategist at Everbright Sun Hung Kai said, as cited by Bloomberg.
He added, "Although Bairong is doing cloud-related business, lots of its revenue comes from peer-to-peer, a gray area that's likely to face more government crackdown. Investors no doubt will be very cautious."
According to Bairong’s prospectus, it generated just 764.23 million yuan in revenues in the first nine months of 2020, down 21% year-over-year.
China Structural Reform Fund Corp., Franchise Fund LP, and Cederberg Capital Ltd. were the cornerstone investors, subscribing for more than 40% of the shares on the offering.