China's Kuaishou Technology priced its Hong Kong IPO at the top of the range to raise $5.4 billion, three sources said, as retail investors swarmed the offering, depositing more than $60 billion in a bid to secure a small slice of the stock.
The huge demand for the online video site from retail investors comes amid growing fears about an asset bubble, with amateur investors boosting the price of assets ranging from cryptocurrencies to new stock market listings.
Those concerns, triggered by a sharp surge in US videogame retailer GameStop and a few other stocks, have led some brokerages globally to raise margin requirements or stop offering leverage for buying securities.
In Hong Kong, however, red hot demand for Kuaishou shares from retail investors pushed margin financing applications to buy the company stock past HK$470 billion ($60.6 billion) at just the top banks and brokers.
Small investors, who have to deposit the funds up front, were competing for just 2.5% of the capital raising, or $135 million of stock, but this was expected to be enlarged to 6% due to the demand, according to a term sheet for the deal.
Margin lending, or the amount brokers can lend to individual investors to purchase shares, has been a big business in Hong Kong in recent years with a large number of equity floats luring retail buyers.
Individual investors in Hong Kong, which has among the highest retail trading levels in the world, are renowned for borrowing heavily as larger bids boost the chances of being allocated shares in an IPO.
Investors rely on a first-day share price rise to pocket gains after paying back the loan, but face a huge risk if a company's stock tanks on debut.
"There are the same risks here that we are seeing globally with things like GameStop, people get carried away and lose rationality," GEO Securities chief executive Francis Lun told Reuters.
"The banks are fuelling this frenzy too. They put all their cash reserves into this IPO frenzy. There are no other areas where they can generate HK$400 billion ($52 billion) worth of loans so quickly and they earn interest from that."
Kuaishou's IPO was priced at HK$115 apiece, the top of its marketing range, on Friday, the final day of book-building, said two sources with direct knowledge of the matter. They declined to be named as the information had not yet been made public.
The company did not respond to a request for comment.
HSBC, the largest bank in Hong Kong, expanded its margin financing quota for the deal from HK$150 billion to HK$200 billion after strong demand, a spokeswoman said.
Bank of China Hong Kong offered HK$200 billion to investors, a spokeswoman said. Brokerage Bright Smart Securities had applications for HK$43.9 billion and Haitong International Securities HK$26.8 billion.
Everbright Sun Hung Kai securities strategist Kenny Ng said the surging popularity of digital companies during the COVID-19 pandemic had fueled retail investor demand.
"The whole sector performance of new economy stocks may be the main incentive for the hot demand to Kuaishou."