It has been a bumper year for Chinese initial public offerings. Somehow it has also felt a little underwhelming.
Chinese companies have raised $27.5 billion through IPOs in Hong Kong, on track to smash the previous annual record set in 2007. The city’s latest blockbuster IPO is off to a decent start: Meituan Dianping, which runs an app similar to a mix of Grubhub, Yelp and Groupon, rose 5.3% on its debut Thursday after raising $4.2 billion—valuing it at $51 billion. Chinese firms have raised another $7.4 billion through listings on U.S. exchanges, already the most in a year except for 2014, when e-commerce giant Alibaba raised $25 billion.
Yet euphoria has been noticeably lacking. Several companies have had to temper expectations of their worth: Meituan originally hoped for a $60 billion valuation, for example. And even when enthusiasm has been high, it has soon fizzled out. NIO, China’s answer to Tesla, jumped 76% last Thursday, soon after its U.S. debut, but has since dropped 27%. News aggregator Qutoutiao more than doubled on its first day of trading Friday, but has already given up most of those gains.
Meituan Dianping, which debuted Thursday, had originally hoped for a $60 billion valuation. Photo: Paul Yeung/Bloomberg News
A rocky backdrop for Chinese technology stocks hasn’t helped, with shares in giants such as Tencent tumbling this year. Investors also seem more wary of companies such as Meituan and Xiaomi, which boast high market shares but less impressive profitability records. Some companies have come to market with expectations overinflated by several rounds of private fundraising.
Hong Kong’s obvious desire to attract more IPOs by lowering its standards has been a mixed success. The local exchange has made it easier to list for tech companies with dual-class share structures, like Meituan, and biotech companies that don’t yet generate revenue. But many of these Chinese IPOs have flopped: HIV drugmaker Ascletis Pharma , which raised $400 million in July, has since lost almost half its value.
The change in mood is striking. Twelve months ago, tech IPOs in Hong Kong were greeted with something like Beatlemania. Now, optimism for other big potential deals is being reined in, especially as some candidates already face trouble. Didi Chuxing, China’s version of Uber, has been hoping to fetch an IPO valuation of $70 billion to $80 billion as early as this year. But it has found itself embroiled in a crisis after two female passengers were killed during their rides in the space of three months.
There are even clouds around what could be the biggest IPO of all: Ant Financial, said to be worth $150 billion. The Alibaba affiliate has come under increased scrutiny from Beijing as regulators put more limits on its activities.
Chinese IPOs may appear to be sailing along happily, but they are floating on troubled waters.
Write to Jacky Wong at [email protected]