ECM Weekly (29 September 2018) - China Renaissance's First-Day Return Is the Worst in 2018

We approach the end of the quarter with a handful of disappointing IPOs from Hong Kong to the US.

Starting off with Viomi Technology Co Ltd (VIOT US) on Monday, the company opened on a good footing, at US$9.50 per share after pricing at the low-end of US$9 per share. The hype didn't last long. The share price rallied intra-day but closed at US$9.08 just above IPO price. LAIX Inc (LAIX US) went through a similar cycle. It opened at US$16.50, 32% above its IPO price of US$12.50 (mid-range), before getting sold off progressively throughout the day to close just 1.2% above its IPO price. For some reason, this has been a common trend for a handful of first-day IPOs in the US such as X Financial (XYF US) and Qutoutiao Inc (QTT US).

Moving on to Hong Kong, this week's performance continues to remind us that Hong Kong IPOs have been a train wreck this year. Just a quick look across our tracker on HK IPOs above US$100m shows that none of the IPOs are giving positive returns with the exception of the two tightly-held property developers. Meituan Dianping (3690 HK) and Haidilao (6862 HK) tried to hold their ground on the first two days but fell through its IPO price midweek. Both companies managed to claw back lost ground on Friday, probably due to bookrunner support in late afternoon trading.

However, the biggest surprise for most would be the disastrous debut performance of China Renaissance Holdings (1911 HK), closing 22% below IPO price. We weren't sure if there was bookrunner support judging by the late afternoon trading because, based on our experience, HK IPOs tend to get propped up in the late afternoon if they fell through their IPO price. The IPO is the worst first-day return we have seen so far in 2018, shown in the bar chart below. Last year, we had Bestway Global Holding (3358 HK) falling by 24% on the first day.

Next week, Midea Real Estate (3990 HK) will be closing its books. For IPOs in the pipeline, we heard that Innovent Biologics Inc (1641475D HK) will be pre-marketing for its IPO next week and Futu Securities, a Tencent-backed brokerage is starting preparations for its US IPO.