Another day, another initial public offering (IPO), another Chinese billionaire magically appears.
Mu Rongjun (穆榮均), the cofounder of food-delivery behemoth Meituan Dianping (美團點評), is poised to be the latest to join the club as the company announced plans to go public last month. Of the 27 billionaires to surface in Asia this year, about a third did so through IPOs in Hong Kong and Shenzhen, the Bloomberg Billionaires Index showed.
Now the question is whether that torrid pace of wealth creation can continue as global trade tensions mount and markets struggle to hold gains.
Investor demand already appears to be flagging for Xiaomi Corp’s (小米) upcoming US$4.7 billion debut, with some institutional investors seeing bids for the Chinese smartphone maker’s shares as low as HK$15.20 on Thursday, with no offers in gray-market trading, people familiar with the matter said.
That is 11 percent below the issue price.
Market volatility fueled by fears of a trade war could pose challenges for Meituan Dianping ahead of the IPO, said Ryan Roberts, a senior analyst at MCM Partners in Hong Kong.
“There are definitely arguments that there are some valuation bubbles in Chinese technology companies, especially for those that have not yet turned profitable, which can make establishing their valuation difficult in a public offering,” Roberts said. “Investors backing the IPO need to have conviction that profitability and cash flow generation are on the horizon at some point — not just a promise.”
Meituan Dianping, backed by top shareholder Tencent Holdings Ltd (騰訊), posted a loss of 19 billion yuan (US$2.86 billion at the current exchange rate) last year, as spending on marketing and research ballooned. Mu has a US$1.4 billion fortune with his 2.5 percent holding in the company. The Beijing-based firm declined to comment.
The January IPO of C-Mer Eye Care Holdings Ltd (希瑪眼科醫療控股) produced this year’s first new Chinese billionaire, Dennis Lam (林順潮), who also became Hong Kong’s first billionaire ophthalmologist.
Xiaomi’s offering could produce at least three others, while the debut of Contemporary Amperex Technology Co Ltd (時代新能源科技), the world’s biggest maker of batteries for electric vehicles, brought four within its first week of trading.
Those eight tycoons, along with Mu, had a combined net worth of US$18.5 billion as of Tuesday.
Deloitte has forecast that Hong Kong and mainland IPO markets would raise as much as US$54 billion for about 340 companies by the end of this year.
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