QuantumPharm becomes Hong Kong's third-largest IPO of 2024 after pricing shares at HK$5.28

Tencent-backed QuantumPharm, an artificial intelligence (AI) drug researcher, has become Hong Kong's third-largest listing of the year after pricing its initial public offering (IPO) at the low end of the range.

The IPO was priced at HK$5.28 per share, towards the low end of the HK$5.03 to HK$6.03 range, according to stock brokers who were notified of the price.

QuantumPharm's HK$989.3 million (US$126.8 million) fundraising puts it behind tea shop giant Sichuan Baicha Baidao Industrial's HK$2.58 billion IPO in April and RoboSense Technology's HK$1.06 billion offering in January, according to LSEG data.

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The results of the allotments will be made on Wednesday along with the IPO's formal pricing, followed by the listing on Thursday under the stock code 2228.

QuantumPharm co-founder and CEO Ma Jian (left) with co-founder and chairman Wen Shuhao at the company's IPO press conference in Hong Kong on June 3. Photo: Xiaomei Chen alt=QuantumPharm co-founder and CEO Ma Jian (left) with co-founder and chairman Wen Shuhao at the company's IPO press conference in Hong Kong on June 3. Photo: Xiaomei Chen>

The IPO's pricing came as a surprise to the market after a strong response from investors during the subscription period last week.

QuantumPharm received about HK$4.3 billion of orders based on 12 major brokers' margin lending to clients for the retail tranche when the books closed on Friday, representing an oversubscription of 75 times.

"QuantumPharm's IPO has proved to be popular according to the subscription data, which may be related to the recent improvement in market momentum," said Tom Chan Pak-lam, permanent honorary president of the Institute of Securities Dealers.

He added the company may have deliberately priced the IPO at the low end of the targeted range to leave room for appreciation on its trading debut.

"If the company makes a strong debut, it will encourage more investors to step into the IPO market and help Hong Kong's overall market for the rest of the year."

QuantumPharm is the first company to list under Chapter 18C, a new regime introduced more than a year ago for pre-revenue specialist technology firms. Chapter 18C allows companies worth at least HK$10 billion to sell shares even before they have made any revenue.

Normal listing candidates have to make at least a combined HK$80 million profit in the three years leading to their IPO.

The successful fundraising is a sign of a nascent recovery of Hong Kong's IPO market. First-time stock offerings in the city fell 29 per cent in the first quarter to US$604.4 million, the slowest start to a year since 2009, according to LSEG data.

QuantumPharm's IPO will take the overall fundraising in Hong Kong this year to US$1.41 billion, a third lower compared with a year ago. New listings raised US$24.49 billion in the same period in 2021.

"Although QuantumPharm's IPO is not large, it is significant compared with the fundraising scale seen this year," said Kenny Ng Lai-yin, a strategist at Everbright Securities International.

The company's use of artificial intelligence, quantum physics and automation have high technological barriers, which is another reason investors were interested in the IPO, he said. "With the improvement in stock market sentiment amid recent support from mainland Chinese regulators, the Hong Kong IPO market is likely to continue to benefit and recover."

QuantumPharm, also known as XtalPi, had originally set aside 95 per cent of the 187.37 million new shares for global investors and the rest for retail investors.

However, the 75 times oversubscription of the retail portion triggered a clawback mechanism under the listing rule. This increased the shares available for retail investors to 37.48 million, or 20 per cent of the total offering, while reducing the international tranche to 80 per cent.

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