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Retail investors give Meituan Dianping IPO the cold shoulder

Chinese online food delivery-to-ticketing services platform Meituan Dianping’s initial public offering was given the cold shoulder by most of Hong Kong’s retail investors, adding more signs that investors are losing their appetite for Chinese tech stocks as promises of bountiful profits go unmet. Shares in Tencent and Alibaba have plummeted this summer after both posted weak earnings, while Meituan has yet to even reach profitability.

Retail investors subscripted for the initial public offerings using HK$1.52 billion margin loans, which is only 88 per cent of the HK$ 1.73 billion allocated for open market subscription, according to data from 16 retail brokers in Hong Kong.

The city’s IPO market usually sees offerings oversubscribed, sometimes by hundreds of times, as investors borrow heavily to place orders.

Meituan Dianping announced Hong Kong IPO, setting an indicative price range of HK$60 to HK$72 per share at a valuation of up to $55 billion, which could make it the world’s biggest internet-focused float since e-commerce giant Alibaba Group’s $25 billion New York listing in 2014.

Meituan Dianping started taking orders last week and five cornerstone investors, including existing backer Tencent Holdings Ltd., have agreed to buy a combined $1.5 billion of stock in the offering. It’s also reported that Meituan Dianping has attracted Hong Kong’s richest man Li Ka-shing and Thomas Lau, the chairman of department store operator Lifestyle International Holdings Ltd., to an initial public offering.

The company will be the second company to take advantage of new regulations that allow companies to offer weighted voting rights in Hong Kong. The so-called superapp hopes to raise $4.4 billion by issuing over 480 million Class B shares, each of which entitles the shareholder to one vote. The company’s Class A shares, which are good for 10 votes, will be held by CEO Wang Xing and two other top executives.

Xiaomi was the first company to list dual class shares in Hong Kong, doing so earlier this year, but the smartphone maker’s weak debut was a poor advertisement for the new system. Mainland regulators excluded Xiaomi from the Hong Kong stock connect, a scheme that allows investors in mainland China to buy up Hong Kong stock, because they thought the weighted voting structure was too complicated for mainland investors to understand.

In April, Meituan bought loss-making bike share operator Mobike for $2.7 billion, pushing company finances further into arrears. Meituan recorded losses of $3.3 billion for the first four months of the year, nearly three times its deficit for the same period in 2017.

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