Kuaishou Trades at Twice IPO Price in Gray Market

Institutional investors are buying Kuaishou Technology’s Hong Kong shares before its Friday debut at a significant premium to the listing price, underscoring the high level of demand for the world’s biggest internet initial public offering in two years.

Some trades were executed for HK$250 apiece in gray-market trading Monday, according to people familiar with the matter, who asked not to be identified as they are not authorized to speak to the media. That’s more than double the listing price of HK$115 and a bigger premium than the 50% jump on Ant Group Co.’s planned Hong Kong offering before it was scrapped.

If Kuaishou’s shares rise as much on Friday it would be the third-best debut for an IPO over $1 billion in Hong Kong on record, data compiled by Bloomberg show.

“The scale of the premium is quite extraordinary given that it reflects institutional buying and one assumes a more analytical perspective on value than you typically see from retail traders,” said Gary Dugan, chief executive officer of the Global CIO Office. “The fear was that institutional investors would back off from the market given the recent volatility. The support in the market for new issues bodes well for further gains in Asian markets.”

An external representative for Kuaishou declined to comment.

In a so-called gray market, investors can bid for new shares before they officially start trading on a stock exchange. The over-the-counter mechanism is often seen as an early indicator of investor demand for an IPO’s debut. Retail buyers will be able to trade through a similar channel a day before Kuaishou begins trading on Friday.

The short-video app company, which is backed by Tencent Holdings Ltd., sold 365 million shares at HK$115 apiece, according to terms for the deal obtained by Bloomberg News. The share sale values the rival to ByteDance Ltd. at $60.9 billion.

Kuaishou’s IPO proved a major hit with both institutional and retail investors, with the latter putting in orders worth $165 billion, a record for the city.

©2021 Bloomberg L.P.

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