ECM Weekly (15 September 2018) - Fast & Furious - NIO, Qutoutiao, Haidilao, Viomi, X Financial

It has been a frustrating week for us for sitting out on the big rally in the Chinese ADR listings and the massive US$4.4bn Yahoo Japan (4689 JP) placement.

To start off, the one thing I was right about was that NIO Inc (NIO US)'s performance would set the tone for subsequent Chinese ADR listings. After pricing at the low end and briefly crashing in the first hour of trading, NIO managed to close 5% above IPO price and subsequently came roaring back to life on the second day to close 85% above IPO its IPO price. It traded at the high 5s but nowhere close to our buy level of US$5 which was probably a tad too conservative. Tesla Motors (TSLA US)'s shipment in China grinding to a halt as pointed out by JL Warren Capital in her insight, TSLA China Sales Evaporate After Import Tariff Hike, probably helped as well.

Off the back of NIO's incredible run, Qutoutiao Inc (QTT US), which is Tencent-backed like NIO, made a home run in a similar fashion; priced at the low-end and even reducing the number of ADS offered. The one tiny Chinese ADR we were right about was 111 Inc (YI US) which is struggling to hold on to its IPO price despite book runner support. Perhaps they should have gotten themselves some Tencent support before getting listed?

Back in Hong Kong, things are a little more predictable. China Chunlai Education (1969 HK) and Hua Medicine Ltd (2552 HK) took a hit to their share price. Chunlai is currently trading some 20% below IPO price while Hua Medicine managed to claw back its lost ground to close at its IPO price probably due to book runner support.

In the placement space, there was Yahoo Japan's massive US$4.4bn secondary accelerated placement. Based on past experience and the numbers (sheer size relative to ADV), we thought that it would be at least some overhang on the share price in the short-term. But we were terribly wrong. Travis Lundy has brilliantly explained what happened before and what should be happening post-placement in his insight, Altaba's Big Yahoo Japan Selldown. Putting it in simpler terms, the share price has corrected with the expectation that there will be a massive selldown by Altaba and the fact that Altaba managed to offload its entire holdings mean that 1) there will be demand from index buying, 2) there is demand from short covering, and 3) there is no longer a reason to stay short on the company and the way to go from here is up.

There are no new IPO filings this week