Asenior equities banker received a call last week from a client whose company he helped float in Hong Kong last year. How, asked the client, can we increase trading volume and interest in the company? The banker’s answer was simple although his solution was anything but: intensive pitching to potential investors all over again.
The company is in danger of becoming what Hong Kong bankers are dubbing a zombie, or “Z-shares” — that is, newish companies that trade little, relative to their size, because their so-called free float is held mostly by cornerstone investors. Locked up for six months, these big shareholders at first cannot, and later do not, trade the shares.
The result is a collection of newish but illiquid stocks which do little to pique investor interest — and do even less for Hong Kong’s efforts to rank alongside London and New York, even though the territory is on course to host the most initial public offerings for a second year running.