(Oct 28): Suzhou Dongshan Precision Manufacturing Co shares slumped on their first day of trading in Hong Kong after the company raised HK$9.9 billion (US$1.3 billion or RM5.2 billion), a debut that tests investor appetite for artificial intelligence (AI)-linked listings after a sharp market pullback.
The printed circuit board maker’s stock declined as much as 6.1% early Wednesday, after the company priced 113.8 million shares at HK$86.80 apiece, below the maximum and at a 35% discount to the previous close of its Shenzhen-listed stock. The deal was about half the size of the US$3 billion (RM12.3 billion) Dongshan first sought and gave Dongshan Precision a market value of about US$30 billion.
The debut arrives at a tricky moment for Hong Kong. A listing boom has put the 2021 record in share-sale proceeds within reach, but rising bond yields and poor deal performance have made investors and issuers turn more cautious recently. A string of initial public offering withdrawals and delays, including by major data centre operators in the region, has also added pressure that’s prompted some companies in Hong Kong to put near-term listing plans on hold.
“It still looks more like a falling knife, particularly as investors reassess AI-related valuations and spending,” said Gerald Gan, chief investment officer at Singapore-based Reed Capital. The decision to cut the Hong Kong offering from as much as US$3 billion “also tells me that appetite for large deals is becoming more selective — Hong Kong’s IPO pipeline remains active, but investors are increasingly demanding better valuations rather than buying every AI-related listing indiscriminately”.
Dongshan’s was the 10th Hong Kong listing this year to top US$1 billion in proceeds, out of almost 120 deals so far, according to data compiled by Bloomberg. The biggest were Zhongji Innolight Co and Luxshare Precision Industry Co, which raised US$7.8 billion and US$3.2 billion, respectively. That’s the most billion-dollar listings since 2020, when there were 16.
The blowout year has been driven in large part by Chinese companies along the AI supply chain. Other PCB makers with recent listings include Victory Giant Technology Huizhou Co, which raised US$3 billion in one of Hong Kong’s biggest deals of the year, and Shenzhen Kinwong Electronic Co, which completed a US$650 million debut in September.
Cornerstone investors — which get guaranteed allocation in the deal in exchange for holding the stock for at least six months — including JPMorgan Asset Management, Alibaba Group Holding Ltd, CPE and Montage Technology Co, agreed to buy a combined 50% of the offering. Jane Street Group and Jump Trading LLC are also among them.
The Suzhou-based company makes PCBs and optical transceivers, key components for AI. It’s the third-largest PCB supplier in an US$85.2 billion global market, according to its filing.
UBS Group AG, Guotai Haitong Securities Co, GF Securities Co and Citic Securities Co are joint sponsors for the Hong Kong listing, according to the preliminary prospectus.
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