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Bilibili joins weak debuts of Chinese tech stocks in Hong Kong

Mainland companies caught in US tensions, rising rates and regulatory crackdown

Bilibili priced its Hong Kong offering at a 2.7% discount to the stock's previous close on the Nasdaq, but its U.S. shares have slid a further 7% since then.    © AP

HONG KONG -- Shares of online video streaming site Bilibili fell as much as 6.8% in their Hong Kong debut on Monday, joining a series of recent disappointing listings in the city.

The Nasdaq-listed company, known as China's YouTube, ended the day at HK$780 after falling as low as HK$753 and down from an issue price of HK$808.

Bilibili, backed by Sony, Tencent Holdings and Alibaba Group Holding, raised $2.6 billion from the initial public offering.

Investors in Hong Kong regularly flock to new listings, lured by a potential first-day pop, which has all but vanished since February amid the global technology sector sell-off and China's crackdown on the country's tech conglomerates.

The changing dynamics could take some sheen off the deluge of offerings in the pipeline, including secondary listing plans by Tencent Music Entertainment Group, Twitter-like service Weibo and e-commerce company Vipshop Holdings.

Blaming Monday's drop on market volatility, Bilibili Chief Executive Chen Rui noted that his company's shares also fell on their Nasdaq debut in 2018, in comments reported by domestic media. 

Among the eight companies raising at least $100 million on the Hong Kong Stock Exchange that have made their debut since Feb. 1, two closed down on their first day of trading, two were flat and four rose -- although two of those increases were just nominally higher, according to data service Dealogic.

Online search giant Baidu listed on March 23, but its shares are now 17% lower than the issue price. The opening performances since February compare with average first-day gains of 19% in 2020 and 48% a year earlier among similarly sized offerings.

Bilibili shares have lost 38% since Feb. 11 on the Nasdaq as investors fled tech-sector stocks after long-term interest rates rose, denting the future valuation prospects of tech companies.

Bilibili priced its Hong Kong offering at a 2.7% discount to the stock's last close on the Nasdaq last week, giving it a valuation of $39.4 billion. The pricing compared to maximum guidance of HK$988 for retail investors.

However, the Shanghai-based company's shares have dropped a further 7% on the Nasdaq since the price was set in Hong Kong.

The largest mainland companies with a primary listing on American exchanges and secondary listings in Hong Kong, such as Alibaba, JD.com, NetEase and Baidu are trading at almost the same valuation on both exchanges. As a result, the sustained sell-off in tech stocks is roiling opening-day performances in Hong Kong, given that shares start trading several days after pricing in the city. Bilibili set its issue price on Tuesday.

Analysts also consider Bilibili expensive compared with its peers. Its share price has surged more than 400% in the past year, with the market valuing it over twice its Nasdaq-listed peer IQIYI, a Baidu-backed video sharing platform that has a larger active user base and more subscribers.

Despite the recent lackluster openings, investors in Hong Kong have continued to back new listings. Bilibili's offering was subscribed 174 times by retail investors and 11.9 times by institutional investors, according to a filing.

Mainland Chinese companies also are shrugging off falling valuations and proceeding with the so-called homecoming listings, which began with Alibaba in 2019, as U.S. authorities, including the Treasury, Defense and Commerce departments, and the Federal Communications Commission, blacklisted Chinese companies.

Under a law passed last year, Chinese companies face expulsion from American exchanges unless U.S. regulators are permitted to review their audit records. Beijing forbids such reviews, citing national security.

The U.S. Securities and Exchange Commission last week said it was taking initial steps to force foreign companies listed in New York to provide access to financial audits or risk being forcibly delisted after three years of noncompliance.

The FCC this month designated five Chinese companies, including Huawei Technologies and Hangzhou Hikvision Digital Technology, as national security threats under a 2019 law aimed at protecting U.S. communications networks.

That move came just days after CNOOC, the largest Chinese offshore oil producer, was expelled from the New York Stock Exchange to comply with an executive order issued last November by then-President Donald Trump. The order restricted U.S. investment in companies found to have ties to the Chinese military.

China Mobile, China Telecom and China Unicom (Hong Kong) were removed from NYSE trading in January. All four companies have sought a review of their removal.

Additional reporting by Nikki Sun.

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