Nasdaq-listed online brokerage platform Futu Holdings on Wednesday raised US$313.5 million from its first follow-on offering since its 2019 listing, which the company plans to use to expand its margin financing business.
The new American depositary receipts were priced at US$33 each, which represents a 6.8 per cent discount to its closing price of US$35.4 on Tuesday, according to people familiar with the transaction. The offer of 9.5 million ADS has come amid strong performance of its share price, which has more than tripled year-to-date. It reached an all-time high on US$40.3 on August 5.
An overallotment option of up to 1.425 million ADS has been granted to the joint bookrunners – Goldman Sachs, Credit Suisse, Haitong International and UBS – to cover additional demand from investors. One ADS represents eight class A shares.
Get the latest insights and analysis from our Global Impact newsletter on the big stories originating in China.
The investment banks were not immediately available for comment. Senior management at Futu were also not immediately available for comment.
Futu is backed by social media giant Tencent Holdings, which owns about 33 per cent stake in the company. The brokerage, which charges zero commission and offers online trading of Hong Kong, Chinese and US stocks, has in recent years been aggressively expanding its business in Hong Kong under Futu Securities. It vies with rival platforms, such as Huatai Securities and SoFi Hong Kong that do not charge commission.
Futu Securities, which already runs one of mainland China’s biggest mobile stock-trading apps, enables mainland Chinese people to buy and sell Hong Kong and US-listed shares using money they already have parked in overseas banks.
The move to raise funds for expanding its margin financing business comes as online brokerages are getting more business from the increasing number of US-listed Chinese tech giants seeking secondary listings in Hong Kong amid deteriorating US-China relations, and heightened scrutiny on US-listed mainland issuers.
Since the coronavirus pandemic has brought the usual entertainment and gambling activities to a halt because of the extensive lockdowns, retail investors have had more time on their hands to punt on stocks as an alternative, according to some traders.
This can be gauged from the increase in average daily turnover on the Hong Kong stock exchange. The average daily turnover for the first seven months of the year was HK$124.8 billion (US$16.1 billion), an increase of 34 per cent from HK$93.4 billion a year earlier, data from the exchange shows.
During the second quarter, Chinese tech giants JD.com and NetEase together raised over US$6 billion through secondary listings in Hong Kong. Futu disclosed in its second-quarter results that their clients’ total subscription for these two IPOs had exceeded HK$15 billion. It also said the growth in its interest income was partly helped by IPO financing due to an active IPO market in Hong Kong.
“We believe that the increase in US-listed Chinese companies seeking secondary listing in Hong Kong and the surge of high-profile Hong Kong IPOs will act as major tailwinds to our growth,” said Leaf Li Hua, Futu’s chairman and chief executive.
For the three months ended June, Futu’s net profit totalled HK$236.5 million, quadrupling from HK$55.3 million in the same period a year ago. For the first half net profit rose to HK$391.3 million, from HK$78.37 million a year ago.
As of June Futu said about 32 per cent of its 954,950 registered users were paying customers. The discount brokerage said this month it had obtained an in-principal approval from the Monetary Authority of Singapore for a capital markets services licence.
More from South China Morning Post:
- Capital controls? No problem for Tencent-backed Futu, the overseas trading app for Chinese investors
- Tencent-backed Beike surges on NYSE debut after solid IPO reception, shrugging off ‘external noise’ amid frayed US-China relations
- Alibaba Health raising US$1 billion through new share sale to fund expansion of pharmaceutical network