HONG KONG -- Retail investors in Hong Kong are bidding for shares of Chinese short-video platform Kuaishou Technology at a premium of as much as 266% ahead of its market debut on Friday, underscoring the enormous appetite that saw the company break IPO subscription records.
The shares touched HK$322.80 on the gray-market platform run by Phillip Securities Group and HK$421 at Futu Securities, an online brokerage backed by Tencent Holdings, early Thursday evening. That compares with the stock's issue price of HK$115, the top end of the range at which they were marketed.
Kuaishou, which also is backed by Tencent, raised $5.4 billion in the initial public offering. If underwriters exercise their overallotment option, it would become the city's largest IPO since August 2018 when mobile network infrastructure company China Tower raised $7.4 billion.
Kuaishou is a rival of ByteDance-owned Douyin, the Chinese version of TikTok.
The gray market bidding came after institutional investors traded shares at prices as high as HK$250 earlier this week in small lots, people familiar with the situation said. On gray market platforms, investors can bid for new shares before they officially start trading on the exchange.
If the share price jumps similarly when trading begins on the Hong Kong Stock Exchange on Friday, it would mark the market's best debut ever for an IPO of at least $100 million, according to data compiled by Dealogic.
"It's been a hot stock from the start for both retail and institutional investors," said Andrew Sullivan, a director at brokerage Pearl Bridge Partners in Hong Kong.
"The short-video format has been so successful in so many countries that institutions are keen to get exposure," he said. "It looks certain to have a strong official debut, but with a lot of the retail demand backed by margin loans, investors may look to cash out ahead of the Lunar New York holidays, so further upside may be limited."
The best-debut crown currently is held by Chinese biotech company Ocumension Therapeutics, which soared 152% last year on its debut after raising $230 million.
The Hong Kong exchange will close for the holidays at midday on Feb. 11 and reopen on Feb. 16.
Kuaishou's IPO attracted 1.42 million applications from individual investors, or almost one in every five Hong Kong residents, according to an allotment notice. Investors placed a record $162 billion in share orders -- equal to bids for the Ant Group's abortive offering, which would have been the world's largest IPO, and equivalent to 1,204 the amount of Kuaishou shares on offer
The company initially offered only 9.1 million shares to retail investors in the IPO, or 2.5% of the total sale, but that climbed to 6% under a deal clause that kicked in because the retail offering was more than 95 times oversubscribed.
The institutional portion of the IPO, which included commitments of $2.45 billion from 10 cornerstone investors, including BlackRock, Singapore investment company Temasek and Fidelity, was subscribed 39 times, Kuaishou said.
Analysts say investors' IPO appetites have been slaked by a desire to participate in fast growing segments of the Chinese economy amid a flood of liquidity, cheap borrowing costs and hopes that COVID-19 vaccines will boost riskier assets,
Kuaishou marketed its shares at a range of HK$110 to HK$115 a share. That gave the company a valuation of $60 billion at the top end, the deal term sheet showed. If underwriters took up the 15% overallotment option, the market capitalization could rise to as much as $61.7 billion.
That would be double the level at which the video platform was valued a year ago when it privately raised about $5 billion, according to people familiar with the transactions.
Kuaishou reported an adjusted loss of 7.2 billion yuan ($1.1 billion) for the first nine months of 2020 compared with an adjusted profit of 1.8 billion yuan in the same period a year earlier, after its selling and marketing expenses surged as part of an effort to build its brand.
Revenue climbed 49% to 40.6 billion yuan over the same period, according to its prospectus. It plans to use its IPO proceeds for research and development, acquisitions and building its ecosystem.
