Banking & Finance

A trio of listings

Zhihu, among others, eyes Hong Kong share sales


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When Zhihu went public on the New York Stock Exchange a  year ago, the Quora-like Chinese online content platform priced its shares at $9.50, raising $523 million from the IPO. The company attracted e-commerce giants Alibaba and, which invested together in a $250 million private placement (Tencent is also a shareholder although it has been an investor in the company since 2015).

A year on, Zhihu is seeking a secondary listing in Hong Kong via a   HK$1.3 billion stock offering. At HK$32.06 ($4.08), the final offer price was quite a bit lower than the original amount pitched to investors. Still, it reflects a small premium to Zhihu’s American depositary shares (each Hong Kong share represents two ADS), which has plunged below the $2 level this week.  

However, not all the 26 million Zhihu shares on offer in Hong Kong are new shares. Some are being divested by existing shareholders – including Qiming Ventures and SAIF – which means that Zhihu’s Hong Kong IPO will not raise any new funds for the company.

“It suggests that the investors are not too optimistic about that the company’s future,” reckoned  Phoenix Finance.

For Alibaba and the Hong Kong listing might offer an opportunity to double-down and recoup some of their earlier losses.

On paper, the two e-commerce giants have already lost over $150 million from their participation in  Zhihu’s New York IPO, pointed out.

Zhihu is not the only New York-listed Chinese firms eyeing a secondary offering in Hong Kong.

Miniso,  a household and consumer goods retailer, is also planning to go public in Hong Kong after raising $608 million from its New York IPO in October 2020. Similarly, the company’s shares have also been pummelled:  falling more than 66% since Miniso’s trading debut.

Zhihu and Miniso are following in the footsteps of other US-listed mainland companies seeking to trade their shares closer to home. Electric carmakers Li Auto and XPENG, for instance, are among those that have reportedly opted to  list in Hong Kong to hedge against the risk of being delisted from US exchanges over audit matters.

“Zhihu’s dual listing in Hong Kong and the US will obviously alleviate investors’ concerns about the platform [being delisted] and thus its share price will no longer be affected by factors that had nothing to do with the company’s fundamentals. That will attract investors who believe in Zhihu’s future,” predicted  36Kr, a tech news portal.

But why did these companies choose Hong Kong and not the mainland A-share market for their  second listing? Analysts suggest the prime reason is that the process in Hong Kong is much simpler. The Hong Kong Stock Exchange (HKEx) has also rolled out a variety of exemptions and preferential treatment policies in its bid to convince the best of mainland China’s companies to list in the city.

“Judging from the current situation, the Hong Kong stock market will usher a wave of listings for mainland stocks. Zhihu returning to Hong Kong in the form of dual main listings not only gives investors a boost of confidence, but also helps generate more interest in Zhihu. The listing can also provide a point of reference for Chinese companies planning to return to Hong Kong for listing in the future,” 36Kr added.

Meanwhile, Singapore-based agrifood firm Japfa is also spinning off its China-focused dairy company AustAsia in a Hong Kong IPO.

The company filed its prospectus with the HKEx last week. The company currently owns 10 large-scale dairy farming operations and two beef cattle farms in China, with approximately 103,000 dairy cows.  In 2020 its total milk production amounted to around 580,000 tonnes.

According to the listing document, the main customers of AustAsia include national dairy product manufacturers such as Mengniu, Bright Dairy and Meiji, which together contributed 83% of the company’s revenue from the raw milk business in 2021.

Separately, it also supplies raw milk to what it calls “emerging brands” such as Land of Promise (a yoghurt brand owned by sugar-free drink maker Genki Forest) and Honest Dairy. In a bid to secure a reliable source of milk, both Genki Forest and Honest Dairy bought stakes in AustAsia last year.

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