HK IPO Subscription | HuaRen Bio-B: Continuing the Pharma B Legend or Falling into the Abyss?

It's the end of the year, and it's time for HKEX to frequently list new stocks. Today, four new stocks came at once, and we finally witnessed the phenomenon of six stocks clashing again. I remember this time last year, we saw the spectacular sight of eight stocks clashing, led by Brook.

First, let's talk about the situation of Guoxia Technology today. The issuer is up to their tricks again, implementing an average allocation method for Group A and Group B, resulting in big gains for the one-lot players and Group B leaders, while Group A tail and hammer players became the biggest losers. Group A tail players who didn't get any shares lost 180 (100 financing fee + 400,000 at 6.8% financing interest), and hammer players who got one lot had a cost of around 700+. Even if they successfully enter the market, the profit is only 600+, which still means losing on fees.

In this round of IPO subscriptions, Group B leaders who got two lots are the biggest winners, while Group A one-lot winners also became big winners. I was lucky this time, getting one lot by chance—unexpected but pleasant, though it still differs from expectations. I guessed that if I wanted to subscribe, I'd have to go for Group B, but I didn't expect Group A tail players to get nothing at all.

Unless something unexpected happens, it should rise 25% to 30% to enter the market. Even if something unlikely happens, it won't lose much anyway.

Hashkey will have to fend for itself—the outlook is likely not optimistic. This has been repeatedly warned before: having scattered domestic placements most likely means an auto-lose.

Of course, the fun of IPO subscriptions lies in the uncertainty. If Hashkey turns things around, consider it my mistake in this round's decision-making.

I've rambled enough in the preface. Here's the main content.

Huaren Bio's main pipelines are Pro-101-1 and Pro-101-2. Pro-101-1 is the core asset, used to treat burns and scalds, but the market size isn't large—only a few billion, with a low ceiling. Pro-101-2 is mainly for treating diabetic foot, which has great potential, with a market size of tens of billions. However, penetration is low, and commercialization is at least 3 to 4 years away. The other pipelines are all in early stages and won't contribute to revenue or profits in the short term.

No need to look at the financial data—revenue is 0, with an annual net loss of 200 million. The current cash flow is only 100 million+, and this listing is to stay afloat. If the IPO fails, the funding chain will break within a year. It's up to retail investors to save it. This is far worse than Baoji—Baoji can still hold on for 2.5 years. Even if they don't raise funds this year, they can do it next year. Trying to compare to Baoji is just wishful thinking.

The high pricing this time is likely due to being held hostage by the primary market. In the Pre-A round in 2021, the market cap was only 805 million, but by the B round in 2023, it had reached 3.3 billion—quadrupling in two years. This issuance is priced at 4.495 to 6.001 billion HKD, or 4.086 to 5.455 billion RMB.

But in the secondary market, Yisheng Bio, with mature products and profits, has a market cap of only 2.217 billion HKD. A company with no revenue yet has an issuance market cap 2 to 3 times that of the industry leader. I can only say that such an inverted valuation is truly the magic of Hong Kong stocks.

Also, this listing is a last-ditch effort—first due to cash flow pressure, and second because of a VAM agreement requiring listing by the end of next year. If they don't list now, there's basically no chance. Wait until the cash flow dries up before hoping for a white knight to save them? This time, I guess the IPO subscribers are the white knights—you're the ones saving Huaren Bio.

The sponsors this time are Huatai and CITIC. Huatai is a well-known IPO education base. CITIC has a halo in the biotech sector, so theoretically, it should be given higher regard. But with such high valuations, I don't think CITIC can carry it.

The last time I said this was about Tianyu Semiconductor, which dropped 30% on its first day. Guess what—can CITIC pull it off this time?

No cornerstone investors this time. Huaren Bio is an 18A company. Historically, 18A listings without cornerstone investors have a first-day drop rate of over 90%. No cornerstone investors mean neither industrial nor financial capital is willing to buy at the current price.

There is a greenshoe, with Huatai as the lead sponsor, but the greenshoe is handled by CITIC CLSA. What a strange combo—afraid Huatai can't handle the greenshoe if it drops, so they brought in CITIC CLSA as a safety net? Did they consider the possibility of greenshoe failure?

The issuance market cap, as mentioned, is 4.495 to 6.001 billion HKD, likely at the upper limit, with 4.2 billion in circulation. It needs to rise at least 126% to enter the market. This is the only point worth betting on—it's the end of the year, and they're hoping to manage the cap to enter the market.

Well, let me tell you, Sheng Beila once thought the same. They bet on entering the market and failed. What a coincidence—it was also co-sponsored by UBS and CITIC.

This public offering has 8,825 lots in total—not bad, at least not the kind with only 3,000 lots where even a desperate subscription yields a 10% success rate.

This stock is expected to freeze over 120 billion in funds—no choice, too many people are betting on entering the market. Assuming 1,200x oversubscription and fewer than 10,000 public lots, I personally think Group A tail is better. Let's estimate a 30% success rate for Group A tail and 25% for Group B leaders.

The unit price is relatively high this time, over 10,000. Of course, a high unit price is a double-edged sword—either win 12,000+ or lose around 1,500 if it drops on debut.

Oh, by the way, Futu has scattered domestic placements this time—see if you believe in luck. Rumors say Futu's scattered domestic placements have a drop rate of over 90%.

You might say the risk-reward ratio is high—making 12,000 sounds tempting, but I'll leave this money-making opportunity to you all.

I won't subscribe this time—I'd rather stick to my mining plays. First, the success rate isn't that high, and second, with so many debuffs, I can't bring myself to do it.

Of course, the above is just my personal analysis and speculation—it doesn't mean it will actually happen, nor is it investment advice. If you really want to subscribe, go ahead—I won't stop you. After all, Huaren Bio really needs saving.

It's hard to tell what's true or false in the news. If I lose this time, so be it. My current win rate should be over 95%—even if I'm wrong this time, it won't be too embarrassing. Or, more likely, my win rate will soar again.

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