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Why is Zhongji unveiling US$1.2 billion in buy-backs before its Hong Kong debut?

The optical-module maker plans to buy back shares denominated in yuan to anchor pricing before its initial public offering in the city

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A general view of Exchange Square in Central on July 21. Photo: Jelly Tse
Zhang Shidongin ShanghaiandHoward Liuin Beijing
Zhongji Innolight’s buy-back plan – worth as much as 8 billion yuan (US$1.2 billion) in the run-up to its offshore listing in Hong Kong – may give global investors an anchor for pricing, as the Chinese supplier of US hyperscalers seeks to pre-empt a shaky start to trading in the city.
The Chinese maker of optical transceivers used in artificial intelligence (AI) data centres said it would repurchase its Shenzhen-listed shares for between 4 billion and 8 billion yuan, through its own or borrowed funds, it said in an exchange statement on Tuesday night, just two days before Zhongji’s high-profile Hong Kong debut on Thursday.

The buy-back came on the heels of a sell-off in Zhongji’s yuan-denominated stock, which was closing in on the offer price of HK$980 for the Hong Kong initial public offering (IPO).

A further decline in the onshore stock would increase the risk that its Hong Kong-listed shares dip below the IPO price on the first day of trading, a setback for the company as it banks on an offshore listing to expand its overseas business and build up a corporate image among global investors.

“Zhongji’s buy-back plan comes at a sensitive time, namely just ahead of its Hong Kong listing,” said Dai Ming, a fund manager at Huichen Asset Management.

“The most plausible reason for doing this is to bolster sentiment before the Hong Kong debut,” he added.

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