Alibaba-backed Bilibili closes down in Hong Kong trading debut

Bilibili Inc, which is backed by Alibaba Group, closed 1% below its listing price in its Hong Kong trading debut on Monday as analysts said a U.S. regulatory crackdown on listed foreign firms hit enthusiasm for the Chinese online video site.

It was the worst start in the city in six months by a major stock listing. Bilibili debuted 2.2% lower, and trade down by 6.7% before it recovered to close at HK$800 a piece.

The company raised HK$20.2 billion ($2.6 billion) after pricing shares at HK$808 each last week.

Bilibili's decline outpaced the Hong Kong's Hang Seng Index closed down 0.07%. The Tech Index was sold off by 1.8%.

Bilibili was the eighth most actively traded by turnover on Monday in Hong Kong with $331.42 million worth of shares changing hands.

The debut is the worst by a major deal in Hong Kong since Yum China Holdings Inc shares closed down 5.3% in September after it raised $2 billion, according to Refinitiv data.

Aequitas Research director Sumeet Singh, who publishes on Smartkarma, said Bilibili's share drop was linked to a selloff underway in most U.S.-listed Chinese companies as a result of the Securities and Exchange Commission (SEC) move to press ahead with plans to delist foreign companies which don't meet U.S. auditing standards.

"Bilibili's ADR appears to have been caught up in the correction leading to the ADRs trading below the Hong Kong secondary listing price," he said. Bilibili ADRs are down 8.4% since the SEC announced the news last week.

One Bilibili Hong Kong share is equal to one of its American Depositary shares, according to the firm's filings, which analysts said closely links the share price performance of the company on both exchanges.

Bilibili sold 25 million shares in the Hong Kong offering and its filings show Alibaba bought more than a third of the stock on offer, taking its holdings to 8.2% of the company.

There has been about $25 billion worth of secondary listings in Hong Kong since the start of 2020, according to Refinitiv.

UBS's head of global banking China Mandy Zhu said the number of so-called 'home coming listings' would continue to rise in Hong Kong. The Swiss bank was a joint sponsor of the Bilibili listing in Hong Kong.

"The advantages of a secondary listing in Hong Kong include relatively manageable regulatory process and time frame, ability to attract more Mainland Chinese and Hong Kong investors as well as efficient capital raising process," Zhu said

"Given the current uncertainty of the Sino-U.S. environment, a secondary listing in Hong Kong could also represent an extra layer of financing channel."