Breakingviews - Meituan IPO shows how to tempt investor appetites

Management team of China's Meituan Dianping, an online food delivery-to-ticketing services platform, attend a news conference on its IPO in Hong Kong, China September 6, 2018. REUTERS/Bobby Yip

HONG KONG (Reuters Breakingviews) - Meituan Dianping’s solid debut offers a recipe for its peers. Shares in the Chinese takeaway-to-taxi group rose as much as 7 percent in their Hong Kong debut on Thursday, taking its value to some $56 billion. That’s respectable, after handset-maker Xiaomi’s fumbled start in July. Its sober expectations and big-name cornerstone investors helped restore appetites.

The super app led by founder Wang Xing faced tough conditions from the start. Hong Kong’s benchmark Hang Seng Index is down by almost a fifth since its peak in January, shaken by U.S.-China trade tensions and concerns over a slowing economy in the People’s Republic. Meanwhile, gaming titan Tencent, the city’s marquee internet listing, has shed over $100 billion in market value since the start of the year, thanks to sputtering growth and a regulatory crackdown.

To make matters worse, damp starts for high-profile debuts like Xiaomi two months ago and state-backed China Tower in August left a bitter aftertaste in the former British colony. The pair raised a combined $11.6 billion, after pricing at the bottom of the marketed ranges. Indeed, Xiaomi’s IPO valuation was nearly half the mooted $100 billion target touted before. As of Sept. 19, both companies are trading below their offer prices.

In contrast, Meituan’s IPO valuation was broadly in line with expectations. To counter weak sentiment, the company courted heavyweights like OppenheimerFunds. In the end, the Chinese group priced near the top of the marketed range. While retail orders for its shares were enough to cover just 1.5 times its tranche, so-called institutional investors piled in. The result, for now, is encouraging.

Fellow Chinese tech giants, from ride-hailing giant Didi Chuxing on, will take note.


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