Xiying's stock price plummeted after its initial public offering and failed to rebound on the second trading day. Its current valuation is only about 30% of its peak in 2022. The capital market is indeed harsh on internet companies that have lost growth momentum. To be strict, even internet companies that still have growth potential have fallen out of favor, and investors now prefer "hard tech" companies, including those involved in AI large models, chips, smart hardware, and embodied intelligence.
However, the poor performance of Hi Alpha's IPO may overshadow an important symbolic significance of its listing: it is the first successful IPO of a major domestic internet platform company since July 2021, after more than five years. During this period, a number of internet unicorns, including ByteDance, Xiaohongshu, and Dewu, have been rumored to go public multiple times, but nothing has come of it. Didi and Ant Group have also been rumored to return to the capital market multiple times, with no result.
To be precise, it's not that there haven't been any internet companies going public during this time, but either they were smaller in scale, such as Dida Chuxing, or they had a stronger supply chain flavor and a weaker consumer platform flavor, such as JD Industrial (Jianguo Logistics, or Caoniao, would have also fallen into this category if its IPO had been successful). The wave of listings by well-known consumer internet giants has been quiet for over five years. The major companies that are already listed in the US are all pushing forward with secondary listings in Hong Kong, or dual primary listings, which they refer to as a "Hong Kong IPO", but this is of course different from a traditional IPO (initial public offering) in the strict sense.
Before listing on the Hong Kong stock exchange, HiFi had sought to go public at least twice: once in New York and once in London, both of which were shelved due to complex reasons. In 2023, many people thought the listing was a sure thing, but it still ended in failure. Because times have changed, regardless of the company structure adopted, internet giants need to file with and obtain approval from domestic regulatory authorities to go public. Taking a Hong Kong listing as an example, any mainland company must obtain approval from the China Securities Regulatory Commission, the Hong Kong Securities and Futures Commission, and the Hong Kong Stock Exchange before it can actually start the IPO process.
In the past five years, due to complex reasons, none of the internet giants have completed the aforementioned process. Although unlisted giants are generally not short of money, the purpose of going public has never been just about fundraising - investors need to cash out and exit, and employee stock incentives also require the power of the public capital market. The claim that "we don't want to go public" is not worth believing. In fact, unlisted giants basically all have discussions and plans on how to comply with regulations to achieve listing, which is not necessary to elaborate on here.
The path to listing in the US is basically blocked, while London and Singapore are too small, making Hong Kong the only reasonable choice. I think HiFi's successful listing in Hong Kong is not only a positive signal, but also a model: the remaining internet unicorns may be able to make an extra effort to strive for a listing on the Hong Kong stock exchange as soon as possible.
That said, the above only addresses the compliance dimension. On the market side, investor feedback to Shein's listing has clearly been lukewarm. Its IPO price corresponds to roughly 13 times trailing P/E — not a rich valuation even factoring in the marked slowdown in growth, particularly in the first quarter. The international offering (mainly geared toward institutions) was only 2.59 times subscribed, a middling result that hardly qualifies as a "hot IPO." Compared with the Zhipu and MiniMax "twin stars" earlier this year, or the domestic chip startups racing to list in Hong Kong, this is a tale of ice and fire — poles apart.
There are not only problems with XiYin itself, but also issues with the market style. "Market style conversion" is one of the most common and notorious buzzwords in the capital market, which translates to: sometimes the market simply favors one type of company and disfavors another, and the market will go to great lengths to find reasons to prove itself correct; even if you say that you are a better company among the "disfavored" type, the market will still give you an valuation discount.
If you're not superstitious, you can of course push forward. If you are, it's probably better to wait for the right moment. As long as compliance issues are resolved, waiting isn't a major problem. HiMusic had essentially resolved all its listing compliance issues by June last year, then spent some time addressing the issue of its valuation being inverted - essentially coordinating the interests of old and new shareholders - before launching its IPO in July this year. I think other internet unicorns may also follow this rhythm - as long as they can get approval from the relevant authorities, they can rest easy and don't need to rush to list at this particular time.
In a few months, or a few quarters, when the "market style conversion" arrives again, we may see a batch of internet unicorns that were thought to "never go public" list on the Hong Kong stock market. HiFi's listing is not an isolated case, but rather likely to be the first in a new sequence.
Of course, there's also a possibility that the current "market style" will persist for a very long time, with consumer internet platforms continuing to be out of favor with investors, forcing other internet unicorns to go public at a loss. This possibility is low, but cannot be entirely ignored. As a result, in the coming period, the management of these unicorns will likely face a difficult decision: whether to continue waiting and, if so, how long they will have to wait for the market environment to truly become favorable.
No one knows the answer, because the market is inherently unpredictable.