First-Mover Advantage Is Huge for China's New Tech Board

(Bloomberg) --

There's at least one first-entrant advantage to listing on China's new stock venue.

Four firms have set prices for their tech-board debuts and are on track to raise a combined 4.5 billion yuan ($654 million) from investors, about 50% more than initially planned. One of those -- Raytron Technology Co. -- is poised to raise 167% more than its target. While demand was expected to be high for the initial batch of candidates, it's still an encouraging sign for the Shanghai venue.

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New listings in China have been tightly controlled since 2014 as regulators sought to protect investors from buying into stocks at inflated prices. The Science and Technology Innovation Board is an experiment at loosening those rules -- a bid to get Chinese entrepreneurs to go public at home rather than in Hong Kong or New York. It will be the only onshore venue where initial public offerings can be valued higher than 23 times earnings.

“There's a lot of enthusiasm around the early batch of listings,” said Mark Huang, an analyst at Bright Smart Securities. “The supply is limited at first, so the pent-up demand has resulted in higher-than-expected fundraising targets.”

Raytron Technology, which makes electrical sensors, set its listing price at 20 yuan a share, suggesting a valuation of about 79 times reported earnings. Zhejiang HangKe Technology Incorporated Co. and Suzhou TZTEK Technology Co. plan to raise about 106% and 23% more than originally planned, suggesting multiples of 40 and 57 times profit, respectively. While the first to price -- Suzhou HYC Technology Co. -- will probably raise slightly less than its initial target, it still bagged a multiple of 41.

Hot on the heels of the strong market response to those IPOs, six more companies launched tech board listings Wednesday, aiming to raise a combined of 4.5 billion yuan. All will set their IPO prices on July 8, according to their filings.

Some investors say the high valuations show there's too much hype. Jiang Liangqing, a money manager at Ruisen Capital Management in Beijing, said there's a risk the first listings won't fare so well after their debuts, and could even slump when they start trading. He predicts subsequent tech board IPOs will price at lower valuations.

“The high prices of first batch of tech board listings are mainly driven by strong speculation and short supply,” he said. “There's good chance we'll see some IPOs flop in their trading debuts.”

To contact Bloomberg News staff for this story: Ken Wang in Beijing at ywang1690@bloomberg.net;Ludi Wang in Shanghai at lwang191@bloomberg.net

To contact the editors responsible for this story: Sofia Horta e Costa at shortaecosta@bloomberg.net, Will Davies

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With assistance from Bloomberg