Rate Of ReturnHK IPO Subscription|HashKey: Where is the Future for Hong Kong's Compliant Crypto Exchange?
Today, the grey market trend of Baiji Pharmaceutical opened high, dipped slightly, and then rose again, basically meeting most people's expectations, with a surge of 114%, just one step away from inclusion.
Since the grey market placement didn't dump, it means the traders are still aiming for inclusion. The circulating market cap for inclusion needs 10 billion+ or even 11 billion to be safe, roughly around 66 to 73.
I didn't exit in the grey market, thinking it's a high probability of inclusion. Unless the grey market dumps too hard, I might exit first. Since it didn't dump, I'll hold a bit longer. The official opening tomorrow might see a slight dip, but it's unlikely to break the grey market's lowest price. Hold firmly until inclusion, but it's a pity there was no panic-buying opportunity.
Back to the topic, I've already analyzed Guoxia Tech earlier and probably won't participate. Today, let's continue analyzing HashKey, touted as Hong Kong's first compliant crypto exchange.
We've seen quite a few crypto stocks in this year's U.S. IPO market, and their financials are generally not great, still far from profitability.
Big gainers like BLSH and small gainers like GEMI are still in the red. The advantage is that GEMI, a compliant crypto exchange, has a P/S ratio of around 8, while COIN, with a similar positioning to HashKey, has a P/S ratio of around 10. BLSH, also targeting institutional trading, has a P/S ratio of around 34, which is quite uneven.
HashKey's revenue for the most recent year ending June 2025 is about HKD 620 million, still less than the full-year HKD 720 million in 2024. The IPO price range is HKD 16.45 billion to 19.22 billion, implying a TTM P/E ratio of 26.53 to 31. Compared to GEMI and COIN, it's clearly overvalued, but compared to BLSH, it seems acceptable. However, even at the upper limit, there's not much meat left.
OSL, also listed in Hong Kong, has recently gone crazy, with a TTM P/S ratio of around 35. If compared this way, HashKey's valuation isn't too outrageous. But considering OSL's speculative factors, excluding this month's gains, the TTM P/S ratio is around 30. This also means the upper limit leaves little room for gains.
The company's current cash flow can sustain for about a year, but the IPO is imminent. Next year, it will likely continue burning cash to survive. Compliance costs are high, and compliance also limits some altcoin business, restricting overall trading volume.
The company's main advantage is its channel, but it's limited to Mainland China and Hong Kong. Globally, there are more choices for compliant crypto exchanges.
As Mainland China tightens crypto regulations, demand for compliant exchanges from retail investors will likely increase. Of course, it might also deter some potential users who find it troublesome.
The sponsors are J.P. Morgan and Guotai Junan. J.P. Morgan has been less active in Hong Kong IPOs recently, with poor performance in recent years. Guotai Junan has done well this year and is one of the most crypto-focused stocks in Hong Kong. Overall, it's acceptable, but it would be better if Guotai Junan were the lead sponsor and managed the greenshoe.
Cornerstone investors account for 37.63%, including big names like UBS, Fidelity, and CDH. But the cornerstone isn't fully subscribed, which is still a bit lacking.
There's a greenshoe, managed by J.P. Morgan, not as stable as if Guotai Junan managed it.
This issuance also has a 30% overallotment option, which I believe will definitely be exercised, otherwise, there's no need to raise it to 30%. This also reflects strong institutional demand.
But this time, there's fragmented placement, which those familiar with IPOs know—whenever there's fragmented placement, the win rate drops a notch.
On one hand, preparing for an additional 30% issuance, and on the other, needing fragmented placement to fill the gap—doesn't it smell like false prosperity?
Total issuance is 602,500 lots, with 30,125 lots each for Group A and B. The supply is relatively large, 59% more than Baiji Pharmaceutical. But in terms of fundamentals and financing heat, it's likely inferior to Baiji.
Estimated final frozen funds are around HKD 150 billion, roughly 1,000x oversubscribed. At 1,000x, Group B heads are still better.
If the multiple the night before is below 500x, I'll pass. If it's above 500x but below 1,000x, I might go for Group B heads—note, might, not definitely. If it exceeds 1,000x, I'll go for Group A tails.
Note that these multiples are based on data around 8 PM the night before. If it's 9 AM on the deadline day, the thresholds are 1,000x and 2,000x.
But by then, Futu's IPO subscription is already closed. Futu closes half an hour earlier than Tiger. I'll base my decision on the previous night's data. You can wait for updates after 9 AM on the deadline.
If I decide to participate this time, I'll likely switch to Futu because Tiger's dollar money fund financing for IPOs now charges interest, eliminating its biggest advantage. Of course, Tiger still has the financing deadline half an hour later.
Personally, I'm not very interested in crypto, so I probably won't participate unless the multiple is extremely high for a lottery.
Those interested in crypto can take a shot, but don't hold long-term—better to buy Coinbase for long-term holds.
The above conclusions are based on my analysis of public information and do not constitute professional investment advice. Please think carefully before acting.
$HASHKEY HLDGS(03887.HK)
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