How long can a newly listed stock keep rising more than 40 percent each day?
Food Wise Holdings Ltd. (01632.HK), which began trading on the main board on Tuesday last week, saw its share price go up six times in six days until today.
With such an electrifying dash off the starting blocks, the operator of Viet’s Choice, the largest Vietnamese restaurant chain in the city, finally fell 36 percent to close at HK$10.84 after hitting a peak of HK$17.48.
It had listed at a humble price of HK$2 a share.
Just before today’s collapse, Food Wise closed more than 40 percent higher in each of the past three trading days, after surging two and a half times in the first three trading days.
That’s quite a run – a miracle, actually – given the lukewarm start of the Shenzhen-Hong Kong Stock Connect.
Over 3,000 retail investors applied for shares in Food Wise, making it 116 times subscribed. On its first trading day, Foodwise closed at HK$3.51, or about 75 percent above its IPO price.
To be sure, that’s not even close to the record of Classified Group (Holdings) Ltd. (08232.HK), operator of Classified and several other upscale restaurants, which jumped six times on its debut.
But Food Wise managed to catch up as the trading went on. And because the daily share price growth was within 50 percent, no one stood up to stop the music.
As a result, an investor who was allotted a minimum of 2,000 shares for HK$4,000 gained a paper profit in excess of HK$20,000.
That’s too good to be true, isn’t it?
Interestingly, if you are in the habit of seriously studying a company before investing in it, you probably would have missed this one.
None of my friends, including Vietnamese food lovers, had good comments about the chain’s outlets.
On the other hand, a friend who truly delights in the Shanghainese cuisine being offered by Xiao Nan Guo Restaurant Holdings Ltd. (03666.HK) now has to deal regularly with upset stomach after holding on to the food operator’s non-performing stock.
Which just goes to show that you make money on stocks based on your brains, not your taste buds.
Food Wise is not the most spectacular stock in terms of the best returns for IPO investors.
This year the world’s best-performing IPO is Luen Wong Group Holdings Ltd. (08217.HK), a civil engineering firm which surged 14-fold on its debut.
The company, whose founder is the father of TVB actress Priscilla Wong, seems to be on a roll. It closed today at HK$22.5, about 865 times its listed price of 26 HK cents.
With a market cap of HK$28 billion, Luen Wong is now about 20 times bigger than Shui On Construction (00983.HK), its larger rival with a longer operating history.
In fact, it’s now at least twice the market capitalization of Television Broadcasts (00511.HK).
Well, that’s how it is in the markets, particularly in the IPO game.
Like in the case of a newly released movie, it is anybody’s guess how it would turn out at the box office.
And just like in movies, the show must go on.
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