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

The Hong Kong IPO market is facing a potential setback as key backers, known as cornerstone investors, express doubts about upcoming deals, sources reveal. With more than 60% of new listings in the third quarter trading below their issue prices, these cornerstone investors, who receive guaranteed allocations in exchange for holding shares for six months, are reevaluating their decisions to subscribe to future offerings.

At least one IPO scheduled for October had to be postponed until the following month due to some institutional investors withdrawing from verbal agreements to be cornerstone backers, according to individuals familiar with the situation. "Bankers are now searching for replacements," a source stated, requesting anonymity due to lack of authorization to speak publicly.

This trend follows a weak performance among the city's largest debuts this year, with six out of nine Hong Kong listings raising over US$1 billion in the first three quarters now trading in the red. For instance, Chinese energy-drink maker Eastroc Beverage has dropped over 60% from its issue price since its February debut. The post-IPO weakness has significantly eroded long-term investor confidence, especially amid ongoing market volatility, noted Edward Au Chung-hing, managing partner at Deloitte China.

While funds raised through Hong Kong IPOs reached US$48.4 billion in the first nine months of 2026, a record high since 1980, as of September 30, 20 out of 31 companies listed in the third quarter fell below their offer prices. Notable companies like Rigol Technologies, Medcaptain Medical Technology, Momenta, and Beijing Tong Ren Tang Healthcare Investment have seen their share prices halved from their offer prices.

Despite active participation from sovereign wealth funds and private equity firms, most have recorded paper losses. Temple Global's Temasek subscribed to over US$500 million worth of shares across several companies but now faces losses in three of them. The involvement of international cornerstone investors has grown steadily in recent years, reaching a recent peak this year.

However, smaller listings such as RoboTechnik Intelligent Technology and Shenzhen Longsys Electronics have seen cornerstone participation drop to 35% and 18%, respectively. Despite the challenges, Au remains confident that investors will become more selective and cautious, but this will not deter companies' ambition to list in Hong Kong.