Electric vehicle maker and China unit Vanke to face tough market at Hong Kong debut

(Bloomberg) — An electric-vehicle maker and a unit of Chinese real-estate developer China Vanke Co. have floundered in their business debuts in Hong Kong, following IPOs that together raised more than $1.5 billion. .

Chinese electric vehicle maker Zhejiang Leapmotor Technology Co. plunged as much as 42% to HK$25.05. The company raised about $800 million after selling shares at HK$48, the bottom of a trading range. Leapmotor’s drop puts it on track for the steepest drop on day one with a listing of over $250 million in Hong Kong.

Chinese companies are starting to list in what has been a difficult year for the performance of IPOs and stock markets in general. Before Thursday, half of the 16 companies listed in Hong Kong this year following IPOs that raised more than $100 million ended their first session underwater, with three unchanged and five rising above their listing price. , Bloomberg data shows.

Onewo Inc., the property management unit of China Vanke, fell as much as 7.9% to HK$45.45. The company raised around US$739 million, with shares priced at HK$49.35, the midpoint of a price range given in the offering.

In the Leapmotor deal, the portion reserved for individuals was undersubscribed, with only about 16% of the 13.1 million shares in the public offering placed, according to a Wednesday statement. The funding tranche was “moderately” oversubscribed, the document reads.

“Leapmotor’s initial public offering was costly even after a floor price was set, and the Hong Kong offering was significantly undersubscribed, suggesting investor confidence was weak,” said Shifara Samsudeen, an analyst at Leapmotor. Light Stream Research. The company’s market share expansion is coming at the cost of its margins and it is struggling for gross margins while all of its national peers are making decent gross profits, he added.

Read: Tycoons Behind China’s Surveillance Giant Get Rich From EV Listing

The electric vehicle maker’s main focus is on the mid-to-high-end electric vehicle market, with a price range of 150,000 to 300,000 yuan ($21,400-$42,800), a segment that is expected to show growth. faster by 2023, according to the offering prospectus. citing Frost & Sullivan.

Leapmotor’s falling debut casts a shadow over an expected start for CALB Co., a Chinese supplier of batteries to electric-vehicle makers set to start operations in Hong Kong next week. The company on Wednesday pegged its $1.3 billion IPO at the bottom of the marketed range, the third-biggest offering in town this year.

The trading starts come as equities globally are under pressure after aggressive comments from Federal Reserve policymakers led to a rise in Treasury yields, and a gauge for the US dollar set an all-time high. . The Hang Seng Index plunged 3.4% on Wednesday, the biggest drop since May, to finish at the lowest level in a decade.

Onewo offers residential property services, integrated commercial and urban space services and so-called remote space technology solutions, which incorporate artificial intelligence and business process outsourcing, according to the prospectus. Vanke owns about 63% of the property management unit before the initial public offering.

China’s real estate sector has been under pressure this year, most recently when Covid lockdowns hit home sales from already cash-strapped builders. But last month, Vanke stood out as China’s first blue-chip real estate developer to report stronger earnings, defying a recession that engulfed peers once considered relatively safe.

Onewo’s initial public offering saw better demand than Leapmotor’s. Some 82% of the 11.7mn shares offered to the public were placed, with demand from institutional investors exceeding 3.3 times that available, a statement showed.

Onewo’s Weak Margin Could Influence Earnings Growth: Company Outlook

“Both IPOs were not cheap,” said Ke Yan, head of research at DZT Research in Singapore. “The market is not short of another EV name and a property management name. Management and bankers managed to get investors to agree, but the results were not good.

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