Woohoo…the biggest coming out party of unicorn IPO, what’s your pick?

Recently an army of Chinese tech startups is marching in a hustle and screaming “IPO in HongKong”. An army we mean more than 120 tech companies in the pipeline and a total of $25.5 billion in funds will be raised by IPO in Hong Kong in 2018 according to EY forecasts. The diversity of these tech startups is also breathtaking, covering sectors such as

-fintech

-education

-healthcare

-pharmaceutical

-human resources

-travel

-babycare

-food

-entertainment

-e-commerce

and so on so forth…basically everything you can imagine in your life. And just one important thing bear in mind, most of these companies are in fact heavily invested by China’s two biggest titans, Alibaba’s Jack Ma and Tencent’s Pony Ma who are now probably drumming their fingers on the table with their eyes half shut, counting their next baby jump into the IPO pool for the splash.

BTW, if you ever wonder why HongKong suddenly became the hotspot, well, first let us say it finally changed its rigid listing rule to welcome control freak entrepreneurs, aka the dual-class shares system that allows founders own a small portion of a company’s total stock, but get most of the voting power than all other shareholders. Second, the political weather of trade war makes the option of US IPO sounds very stormy. In contrast HongKong is sunny; it is part of China, and still an international financial hub.

Two superheroes apparently emerged from this IPO army, one is Xiaomi and the other is Meituan.

Xiaomi is the much praised “China’s own version of Apple”, but in many ways has been steering a leaking ship.

-It just disclosed a USD 1.1 billion loss in the first quarter of 2018

-It reported a total net loss of USD6.9 billion in 2017, although depending on which accounting standard you are talking about, a different computation suggests Xiaomi was actually making USD 818 million profit in 2017

These put Xiaomi’s prospect under equivocacy. But Xiaomi firmly believes sometimes things have to get worse before they can get better. Its grand vision is: one day it is going to conquer the world through its affordable hardware & software, already expanding to over 100 categories, and build a unique omnichannel new retail ecosystem.

On the other hand, Meituan is the ultimate “copy king”, started as a Groupon clone, and after series of merger and acquisition, it keeps copying and stamping giant rival’s feet in

-food delivery

-ride-hailing

-hotel booking

-short-term rental

Critics said Meituan is biting off more than it can chew while burning money like setting its ass on fire, a combined USD 2 billion hemorrhages in the past 3 years. Nevertheless, Meituan imposed a devil-may-care attitude. Its IPO pretext said one day it will be a phoenix flying out of the fire and take over all the market share of online to offline life services. (So entrepreneurs, bristle up your ear and here might be a trick for you to learn: you can sell a pure concept, you can lose a massive amount of money, but you always need a convincing and inspiring story to back you up till the end…)

Anyhow the pendulum of public sentiment swings from left to right, right to left, and no one feels certain regarding the IPO performance of the two block blusters, which will also directly impact the temperature of the IPO water for the smaller players later on. Anyhow Xiaomi’s market judgment day is coming soon.

Many people beg the question of why the sudden rush of going public for Chinese tech startups in 2018 and the answers usually boiled down into two:

-Economic outlook: it might not look so optimistic in the next few years (again the trade tension between two largest economies in the world) and VCs are getting tired of raising rounds of money to bake these unicorn startups, and now should be a good time to get these hot potatoes out.

-Herd behavior and psychology: if IPO is a party, then you should join in after it started and leave before it’s finished.

For better or for worse, there is still a heck of choices for stock investors to weigh in and the thrill of chasing China tech money should be no less than watching the scores of World Cup!

By: Cecilia Wu