Key Takeaways:
Fibocom's shares priced strongly as the company raised $360 million in its Hong Kong IPO, but then fell in their trading debut on concerns about overvaluation and margin pressure
The wireless module maker's revenue rose 23.5% in the first half of this year, but its profit grew by a far slower 4.8% as its gross margin got squeezed
Hong Kong may be having one of its best IPO markets in years, but even the recent wave of investor euphoria wasn't enough to boost the Wednesday trading debut for wireless module maker Fibocom Wireless Inc. (0638.HK, 300638.SZ). Things looked promising for the stock after the shares priced at HK$21.50, representing the top of their range. But falling margins and slowing profit growth ultimately spooked investors.
We should also note that even after their disappointing debut, Fibocom's newly listed Hong Kong shares still trade at a frothy valuation that's even higher than its older Shenzhen-listed stock. That's highly unusual from a historical perspective, and shows how bubbly the current IPO market has become in Hong Kong. More on that shortly.
Fibocom's stock began to sag almost immediately after its debut, ultimately closing down 11.7% on Wednesday. The declines continued on Thursday, with the stock down about 8% in morning trade at HK$17.44, nearly 20% below the IPO price.
Fibocom is one of a growing number of stocks listed on China's domestic markets in Shanghai and Shenzhen that is seeking second listings lately in the more globally focused Hong Kong. While many of those companies are seeking Hong Kong listings to raise their global profiles as they expand beyond China, Fibocom seems to be an exception to that pattern.
Founded in 1999 in the southern boomtown of Shenzhen, the company makes little or no mention of using ...
