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SEC Delisting Warning Skewers Zhihu’s Hong Kong IPO

Questions could be asked on the timing of Zhihu’s secondary listing in Hong Kong, after the group’s shares plunged 23.6% and it endured the city’s second worst ever stock debut

Zhou Yuan, founder and CEO of Chinese question-and-answer website Zhihu, speaks during the GeekPark 2019 Rebuild summit in Chengdu. File photo: AFP.


Questions could well be asked about the timing of Zhihu Inc‘s secondary listing in Hong Kong, after the company’s shares plunged 23.6% and it endured the city’s second worst ever stock debut.

Shares of Zhihu, which operates a question and answer website and is also listed in New York, were hit by the equivalent of a market torpedo hours earlier when the US Securities and Exchange Commission said it was one of another 17 Chinese stocks facing potential delisting in the United States for refusing to give access to their audited accounts.

There has been speculation in recent weeks that Beijing and Washington could reach some sort of agreement to prevent Chinese companies listed in the US from being barred, but given the rocky state of bilateral ties the SEC’s regular announcement of companies that fall in this category causes a notable drop in share values of all the firms named.

Zhihu’s shares were priced at HK$32.06 but sank right from the start of trading. They eventually closed at HK$24.50 after hitting a low at HK$23.45, with 4.06 million shares worth HK$100.9 million ($12.86 million) changing hands.

The fall was the second largest ever decline for a secondary listing in Hong Kong, based on Dealogic data. The biggest was Ganfeng Lithium Co when it dropped 29% on its first day in October 2018.


Broader Hang Seng Weakness

The company’s share price fall outpaced broader weakness in the benchmark Hang Seng Index, which eased 0.2%, and compared with a 0.3% gain in the Hang Seng Tech Index.

Zhihu, which provides services similar to Quora, sold 26 million secondary shares in the deal, raising $106 million in its dual primary listing.

The group’s New York-listed shares were up 0.6% on Thursday but remain down 70% so far in 2022.

Two of the company’s listed depository receipts equal one Hong Kong share, based on its regulatory filings for the listing.

Zhihu’s Hong Kong listing comes as an increasing number of US-listed Chinese firms go public in Hong Kong, as the regulatory stand-off between Beijing and Washington over US access to Chinese companies’ audited accounts continues.


• Jim Pollard with reporting by Reuters



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Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years.


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