Research on Tech Companies

Evelyn Zhang

Thematic (Sector/Industry)

A series of recent Chinese policies promoting vocational schools instead of traditional secondary education, and efforts to eliminate after-class cramming makes me to recommend short K12 education related stocks and long vocational training related stocks.

A series of recent Chinese policies promoting vocational schools instead of traditional secondary education, and efforts to eliminate after-class cramming makes me to recommend short K12 education related stocks and long vocational training related stocks.

A Twist of Fate – China’s Suppression of Secondary Education in Favor of Vocational Education

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

The role of lock-ups in IPOs is, as one journal <a href="https://www.jstor.org/stable/1262724?seq=1" target="_blank" rel="noopener">put it</a>, a "commitment device to alleviate moral hazard problems".
Lock-ups can be entered into and negotiated with underwriters, as is the case for secondary listings for <a href="https://www.smartkarma.com/entities/netease" target="_blank" data-smartkarma-citation="entities:29030:1" rel="noopener">NetEase (9999 HK)</a>, <a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com (HK) (9618 HK)</a>, amongst others. For primary listings in Hong Kong, there are standard rules as to the lock-up duration.
According to <a href="https://en-rules.hkex.com.hk/rulebook/1007-0" target="_blank" rel="noopener">Main Board Rule 10.07(1)</a> (or <a href="https://en-rules.hkex.com.hk/rulebook/1316a" target="_blank" rel="noopener">GEM rule 13.16A(1)</a>), if a person/group of persons is/are listed as the controlling shareholder(s) of the issuer's listing application, shall not (apart from any offer of shares for sale discussed in the listing document):
<ol>
<li>dispose of shares (nor enter into agreements) in a period commencing on the date by reference to which disclosure of the shareholding of the controlling shareholder is made in the listing document and ending on the date which is 6 months from the date of listing (the “First Six-month Period”); and</li>
<li>dispose of shares in the period of 6 months commencing on the date on which the First Six-month Period expires, if immediately following such disposal that person or group of persons would cease to be a controlling shareholder (the “Second Six-month Period”).</li>
</ol>
An example of such wording can be found in Yadong's Group (1795 HK)'s (the most recent Main Board listing) "<a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/1117/9515120/2020111700040.pdf" target="_blank" rel="noopener">Share Offer - Announcement of allotment results</a>".
For cornerstone investors, the following is often stated in the share offer document:
<blockquote>
Each of the Cornerstone Investors has agreed that it will not, whether directly or indirectly, at any time during the period of six months following the Listing Date, dispose of any of the Offer Shares it has purchased pursuant to the relevant Cornerstone Investment Agreement, save for certain limited circumstances ...
</blockquote>
Every week in my Event SPACE wrap, I flag large moves (~10%) in CCASS holdings over the past week or so, moves that are often outside normal market transactions.  These may be indicative of share pledges.  Or potential takeovers. Or simply help understand volume swings. 
Large movement(s) concerning recently listed companies are likely lock-up related. 
This insight looks at companies that have been listed for nearly six months or 12 months, as a guide to when insiders/controlling shareholders are permitted to sell, potentially depressing prices and creating an overhang.
A summary of Main Board listings in 2020 is attached at the bottom of this insight.

The role of lock-ups in IPOs is, as one journal put it, a "commitment device to alleviate moral hazard problems".
Lock-ups can be entered into and negotiated with underwriters, as is the case for secondary listings for NetEase (9999 HK), JD.com (HK) (9618 HK), amongst others. For primary listings in Hong Kong, there are standard rules as to the lock-up duration.
According to Main Board Rule 10.07(1) (or GEM rule 13.16A(1)), if a person/group of persons is/are listed as the controlling shareholder(s) of the issuer's listing application, shall not (apart from any offer of shares for sale discussed in the listing document):

dispose of shares (nor enter into agreements) in a period commencing on the date by reference to which disclosure of the shareholding of the controlling shareholder is made in the listing document and ending on the date which is 6 months from the date of listing (the “First Six-month Period”); and
dispose of shares in the period of 6 months commencing on the date on which the First Six-month Period expires, if immediately following such disposal that person or group of persons would cease to be a controlling shareholder (the “Second Six-month Period”).

An example of such wording can be found in Yadong's Group (1795 HK)'s (the most recent Main Board listing) "Share Offer - Announcement of allotment results".
For cornerstone investors, the following is often stated in the share offer document:

Each of the Cornerstone Investors has agreed that it will not, whether directly or indirectly, at any time during the period of six months following the Listing Date, dispose of any of the Offer Shares it has purchased pursuant to the relevant Cornerstone Investment Agreement, save for certain limited circumstances ...

Every week in my Event SPACE wrap, I flag large moves (~10%) in CCASS holdings over the past week or so, moves that are often outside normal market transactions.  These may be indicative of share pledges.  Or potential takeovers. Or simply help understand volume swings. 
Large movement(s) concerning recently listed companies are likely lock-up related. 
This insight looks at companies that have been listed for nearly six months or 12 months, as a guide to when insiders/controlling shareholders are permitted to sell, potentially depressing prices and creating an overhang.
A summary of Main Board listings in 2020 is attached at the bottom of this insight.

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Since the start of 2019 till date, we have covered 96 IPOs. Despite the market turmoil over the past two months, over a third, or 40 IPOs remain above their listing price. 
In this insight, we'll take a quick look at the universe overall and how some of the IPOs in Hong Kong have been fairing.

Since the start of 2019 till date, we have covered 96 IPOs. Despite the market turmoil over the past two months, over a third, or 40 IPOs remain above their listing price. 
In this insight, we'll take a quick look at the universe overall and how some of the IPOs in Hong Kong have been fairing. 

APAC IPOs & Placements

Zhen Zhou, Toh

<a href="https://www.smartkarma.com/entities/huijing-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:28683:1" rel="noopener">Huijing Holdings Co Ltd (9968 HK)</a> raised US$195m at HK$1.93 per share, the bottom-end of its IPO price range. We have previously covered the IPO in:<ul><li>
<a href="https://www.smartkarma.com/insights/huijing-ipo-dongguan-focused-property-developer" target="_blank" data-smartkarma-citation="insights:35567" rel="noopener">Huijing (汇景控股) IPO - Dongguan-Focused Property Developer</a> </li></ul>In this insight, we will look at the IPO deal dynamics and updated valuation.

Huijing Holdings Co Ltd (9968 HK) raised US$195m at HK$1.93 per share, the bottom-end of its IPO price range. We have previously covered the IPO in:
Huijing (汇景控股) IPO - Dongguan-Focused Property Developer In this insight, we will look at the IPO deal dynamics and updated valuation.

Huijing (汇景控股) Trading - Tiny Free-Float with Little Interest from Public

China Science and Education Industry / Equity Capital Markets

China Science and Education Industry (1756 HK)

<a href="https://www.smartkarma.com/entities/huali-university-group-limited" target="_blank" data-smartkarma-citation="entities:26719:1" rel="noopener">Huali University Group (1756 HK)</a> (HUG) raised US$125m at HK$3.26 per share, the top-end of its IPO price range. We have previously covered the IPO in:<ul>
<li>
<a href="https://www.smartkarma.com/insights/huali-university-ipo-early-thoughts-risks-abound" target="_blank" data-smartkarma-citation="insights:31577" rel="noopener">Huali University (华立大学) IPO Early Thoughts - Risks Abound</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/huali-university-ipo-unattractive-valuation" target="_blank" data-smartkarma-citation="insights:34494" rel="noopener">Huali University (华立大学) IPO - Unattractive Valuation</a> </li>
</ul>In this insight, we will look at the IPO deal dynamics and updated valuation.

Huali University Group (1756 HK) (HUG) raised US$125m at HK$3.26 per share, the top-end of its IPO price range. We have previously covered the IPO in:

Huali University (华立大学) IPO Early Thoughts - Risks Abound 

Huali University (华立大学) IPO - Unattractive Valuation 
In this insight, we will look at the IPO deal dynamics and updated valuation.

Huali University (华立大学) Trading - Priced at the Top-End Without Greenshoe

China

China Science and Education Industry Group Limited is an investment holding company that provides private higher education and vocational education services in the People's Republic of China. The company offers applied science-focused and practice-oriented programs, tuition, and student accommodation services through its Huali College, Huali Vocational College, and Huali Technician College. It is headquartered in Guangzhou, Guangdong Province, China, and was founded in 2000.

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China Science and Education Industry (1756 HK)

A Twist of Fate – China’s Suppression of Secondary Education in Favor of Vocational Education

Change is afoot in one of China's main social mobility mechanism, the education system. The country is promoting vocational education in an effort...

Evelyn Zhang

Hong Kong IPOs: Lock-Up Expiries

A look at companies that have been listed for nearly six/12 months, as a guide to when insiders/controlling shareholders are permitted to sell,...

David Blennerhassett

Trade/Investment Ideas from 2019/20 IPOs

Since the start of 2019 till date, we have covered 96 IPOs. Despite the market turmoil over the past two months, over a third, or 40 IPOs remain...

Sumeet Singh

Huijing (汇景控股) Trading - Tiny Free-Float with Little Interest from Public

Huijing Holdings Co Ltd (9968 HK) raised US$195m at HK$1.93 per share, the bottom-end of its IPO price range. We have previously covered the IPO...

Zhen Zhou, Toh

Huali University (华立大学) Trading - Priced at the Top-End Without Greenshoe

Huali University Group (1756 HK) (HUG) raised US$125m at HK$3.26 per share, the top-end of its IPO price range. We have previously covered the IPO...

Zhen Zhou, Toh

Price Gauge

52-week Range

Market Cap (USDm)

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