

China’s IPO Frenzy Lures $273B to One Stock Offering - adventured
http://www.bloomberg.com/news/articles/2015-06-03/china-s-hot-ipo-market-lures-273-billion-to-2-billion-offering

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nichtich
As someone involved in this I feel obligated to explain some basic mechanics
in Chinese IPO. 1\. Unlike in US. The underwriter/issuer doesn't decide who
get the allocation. Instead it's a 2 tier lottery which is purely based on how
much you put in and the RNG. This is mainly to stop the perceived "corruption"
they think exists in US where a nice relationship with the broker can get you
a good allocation in a hot IPO, AND the fact that you can just announce the
amount you want to buy without posting any money for that. 2\. Because of 1,
individual investors treat this as a lottery instead of a popularity contest
as in US, so everyone wants in. As a result, to protect the individual
investors, the equivalent of SEC of china has an unspoken rule that the IPO
company must have a PE ratio below 23(don't ask why 23). With current avg PE
in 70s range, it looked like a sure win for whoever get the lucky allocation.
3\. SO! Whoever get any movable money will be paticipating in this IPO,
because you are looking at a risk free 10% -20% annualized return. Point to me
one guy who think that's not awesome and I'll buy him a skii trip in the Alps.

So, just imagine Apple went IPO today, and priced at 1/3 of PE as MSFT, AND
everybody has the same chance of getting the shares at the IPO price as long
as you have the money to backup your order. How much do you think will be in
this lottery.

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brador
> looking at a risk free 10% -20% annualized return

I understand everything except this part. Where did you get the 10-20% risk
free annualized return?

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nullrouted
Nothing is risk free...as soon as people start promising that you need to run.
Every pyramid scheme in history has promised "risk free" returns.

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ndonnellan
Note: the headline is the number of bids, not the final amount sold, which is
a little over 2B usd if my math is right

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Shivetya
I have to wonder how income distribution is currently in China, the only
change appears to be the addition of industry leaders to what likely before
hand was only party leaders.

Still the amount of money that moves around so quickly brings up the concern
of possible fraud. How stringent are their controls on the market as compared
to Europe or the US?

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blumkvist
Are those rhetorical questions?

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elcct
Is that a rhetorical question?

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blumkvist
No.

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seanmcdirmid
Many China articles on HN today for June 4th.

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curiously
yes, finally we can have affordable housing in vancouver in the future.

