Shares of Black Sesame International Holding Ltd., an AI chipmaker, plummeted by as much as 35% on their first day of trading in Hong Kong, posing a significant challenge to the city’s efforts to attract more technology listings. The Xiaomi Corp.-backed company’s shares dropped to a low of HK$18.28 on Thursday, down from the initial public offering (IPO) price of HK$28, which was already at the lower end of the marketed range. The IPO raised HK$1.04 billion ($133 million).
This poor market reception comes as global markets recover from a recent downturn, including significant losses in AI stocks earlier in the week. The disappointing debut is a setback for Hong Kong, which is striving to revitalize its equity market amid concerns about low IPO volumes and liquidity issues due to the region’s economic slowdown. Notably, Hong Kong Financial Secretary Paul Chan attended Black Sesame’s listing ceremony on Thursday.
According to a filing from Black Sesame, nearly 95% of the offered shares were bought by just five investors before the trading began. Key investors included a subsidiary of Guangzhou Automobile Group Co. and an investment unit of Ningbo Joyson Electronic Corp.
“Given the concentrated share take-up, combined with the tight float, listing performance could be distorted,” said Clarence Chu, an analyst at Aequitas Research Pvt., in a note on the Smartkarma platform.
The IPO’s international portion was only 1.05 times subscribed, indicating weak demand from institutional investors, Chu added.
So far this year, IPOs in Hong Kong have raised $2.44 billion, a 7.6% decrease from the same period in 2023 and significantly below the levels seen in 2021, according to Bloomberg data.
To attract advanced technology companies, including those in AI and semiconductors, Hong Kong Exchanges & Clearing Ltd. introduced a lower listing threshold under Chapter 18C rules last year. These rules were implemented amid the escalating tech conflict between Washington and Beijing, with the Biden administration imposing broader restrictions, such as limiting sales of AI chips to Chinese customers.
QuantumPharm Inc., which describes itself as an AI-powered research-and-development platform for drugmakers, became the first company to list under the 18C rules in June. Its shares have since increased by 10%.
