Hong Kong IPO boom at risk as cornerstone backers get cold feet, sources say

Why are some Hong Kong companies postponing their IPOs after potential cornerstone investors backed away?

Some Hong Kong companies depend on cornerstone investors to support an IPO before the wider sale begins. When those investors withdraw, the issuer may no longer have enough committed demand to proceed confidently. Delaying the listing gives bankers time to find replacements or rebuild the order book.

At least one IPO planned for October was postponed until next month at the earliest. Institutional investors backed away from verbal agreements to become cornerstone backers. Bankers then had to search for substitutes. Some remaining investors also wanted smaller allocations or renewed approval from their internal investment committees.

The immediate trigger was weak trading after recent listings. More than 60 per cent of third-quarter IPOs were below their issue prices. Companies with high valuations and unclear earnings were especially vulnerable. Investors may therefore become more selective, while issuers continue seeking Hong Kong listings but face greater scrutiny and potentially smaller cornerstone commitments.

What is a cornerstone investor in an IPO, and what do they receive in return for committing to buy shares?

A cornerstone investor is an institutional investor that commits to buy part of an IPO before the shares begin public trading. Its participation signals that a substantial investor is willing to support the offering. That commitment can help an issuer build confidence and attract other buyers.

The article says cornerstone investors typically receive guaranteed allocations. In exchange, they agree to hold the shares for six months. This arrangement gives the issuer early demand, while the investor receives access to a specified portion of the offering. The commitment is usually negotiated before the public subscription period.

Cornerstone support has become important in Hong Kong’s market. Among the ten largest IPOs this year, seven had cornerstone allocations representing nearly half their fundraising. But investors are now reconsidering new commitments because many recent listings fell below their issue prices. Some may reduce their investment or seek renewed internal approval.

How widespread has the weak performance been: how many recent Hong Kong IPOs fell below their issue prices, and how much money was raised this year?

The weakness has been broad rather than limited to one or two companies. By September 30, 20 of the 31 companies listed in Hong Kong during the third quarter were trading below their offer prices. That is more than 60 per cent of the quarter’s new listings.

Several companies suffered especially steep declines. Rigol Technologies, Medcaptain Medical Technology, Momenta and Beijing Tong Ren Tang Healthcare Investment all saw their shares halve from their offer prices. Among nine Hong Kong IPOs raising more than US$1 billion in the first three quarters, six were trading in the red.

The poor performance contrasts with record fundraising. Hong Kong IPOs raised US$48.4 billion during the first nine months of 2026, the highest amount for that period since records began in 1980. The combination of strong fundraising and weak trading has damaged confidence and made investors more cautious about upcoming deals.

Why does a share price falling below its issue price make cornerstone investors more cautious about joining new deals?

Cornerstone investors commit before a company’s shares begin trading. If the market price later falls below the issue price, their holdings are worth less than they paid. They may not be able to sell immediately because the usual agreement requires a six-month holding period. That makes the downside especially visible and difficult to avoid.

The article gives Temasek as an example. It subscribed to more than US$500 million across four companies: Chaozhou Chaozhou Three-Circle, Eastroc Beverage, Luxshare and Innolight. Three of those investments were sitting on losses. Eastroc Beverage had fallen more than 60 per cent from its February debut price.

These results weaken confidence in future commitments. Investors may request smaller allocations or return to their internal investment committees. They are especially cautious about issuers with high valuations and unclear earnings. As a result, cornerstone demand may shrink even while companies remain determined to list in Hong Kong.

Why are sovereign wealth funds, private equity firms, and other large institutional investors important to Hong Kong IPOs?

Sovereign wealth funds, private equity firms and other institutions matter because they can commit large sums before an IPO opens to the broader market. Their allocations can anchor demand and help an issuer complete its fundraising plan. Their involvement may also reassure other investors that the company has undergone serious institutional review.

The article names GIC, Hillhouse and Temasek among active participants. Temasek subscribed to more than US$500 million across four Hong Kong IPOs. International cornerstone participation had also recovered to a recent high, with long-term funds from the Middle East, Europe, North America and Asia-Pacific joining deals.

However, institutional participation is not a guarantee of success. Most of the named funds recorded paper losses on recent investments. Seven of the ten largest IPOs this year had cornerstone allocations near half of total fundraising. If institutions become cautious, issuers may need smaller deals, more replacements or longer preparation.

If cornerstone investors withdraw, what other ways can a company try to complete its IPO or raise money?

If cornerstone investors withdraw, a company can try to replace them with other institutional investors. It can also seek more orders from public investors, including retail buyers, although that demand may be less predictable. These steps can help rebuild the order book and show that sufficient interest remains.

A company might also reduce the number of shares offered or lower the IPO price. A smaller or cheaper offering requires less capital and may look more attractive to investors. Another option is postponing the listing, as at least one Hong Kong IPO did after potential backers pulled out. These alternatives are general financing practices, not methods described in detail in the article.

If public-market conditions remain weak, the company could raise money privately through venture capital, private equity or a strategic investor before trying again. It might also use loans or other financing, depending on its finances. Each choice involves trade-offs, including less money, possible dilution, higher costs or a later listing.

How does an IPO work, and why can the market price of a newly listed share quickly move above or below the price set by the company?

In an IPO, a company offers shares to investors for the first time. It sets an issue price with its advisers, markets the deal and allocates shares among investors. After listing, those shares trade openly on an exchange. The company receives the IPO proceeds, while investors gain tradable ownership stakes.

The issue price is set before normal market trading begins. Once trading starts, buyers and sellers continuously reassess the company’s prospects, earnings, valuation and risks. If more investors want the shares than are willing to sell, the market price can rise above the issue price. If selling pressure is stronger, it can fall below it.

The article illustrates this risk clearly. More than 60 per cent of third-quarter Hong Kong listings traded below their offer prices. Eastroc Beverage fell more than 60 per cent, while Shein and Luxshare traded 27 per cent and 20 per cent below their issue prices. An IPO price therefore does not guarantee later performance.

Key Facts:

📌 At least one October IPO was delayed until next month at the earliest.

📌 Bankers are scrambling to replace investors who withdrew.

📌 High valuations and unclear earnings especially worry cornerstone investors.

📌 Cornerstone investors typically receive guaranteed IPO allocations.

📌 They usually agree to hold shares for six months.

📌 Their commitments provide early demand for an offering.

📌 Twenty of 31 third-quarter listings traded below their offer prices.