The Hong Kong Securities and Futures Commission (SFC) and the Hong Kong Stock Exchange (HKEX) jointly issued a letter to IPO sponsors last week, reportedly mentioning the poor quality of some new listing applications and raising concerns about certain non-compliant behaviors. In fact, the IPO market has been volatile recently, and the myth of "B-system IPOs always rising" has been shattered. While companies like Excellence Ruixin (2687) and Baoji Pharmaceutical (2659) continue to perform well, there have also been examples of IPOs falling below their issue price, such as Xiaomian (2408) and Tianyu Semiconductor (2658). Currently, HASHKEY (3887) and Guoxia Technology (2655), which are also in the IPO process, also have their own concerns. Investors should pay attention to the relevant risk factors.
According to a letter from the Securities and Futures Commission and the Hong Kong Stock Exchange to sponsors, cited by Bloomberg, the quality of some of the application materials submitted by many market participants, especially sponsoring institutions, is worrying. Some practitioners may be unfamiliar with the relevant regulatory requirements or lack sufficient experience in handling new listing applications in Hong Kong.
HASHKEY (3887) is the parent company of Hashkey Exchange, a licensed virtual asset exchange in Hong Kong.
HashKey has suffered losses for several consecutive years, with net liabilities exceeding 1.5 billion.
For HashKey, subscriptions will close this Friday. The public offering ratio is 10%, and Mechanism B is adopted, meaning there is no clawback mechanism. The global offering is approximately 241 million shares, with 400 shares per lot, totaling 602,500 lots for Group A and Group B, indicating a substantial supply. Nine cornerstone investors have been introduced, subscribing for a total of US$75 million, representing 37.63% of the total offering. The market capitalization is estimated at between RMB 16.4 billion and RMB 19.2 billion. A greenshoe option is included, and JPMorgan, Guotai Haitong, and Guotai Junan International are the joint sponsors.
The group is the parent company of Hashkey Exchange, a licensed virtual asset exchange in Hong Kong. According to Frost & Sullivan, it is the largest regional onshore platform in Asia by trading volume in 2024. Last year, its revenue increased 2.47 times year-on-year to HK$720 million, but it continued to suffer losses that widened by 1.05 times to HK$1.19 billion. In the first six months of this year, revenue fell 26% year-on-year to HK$284 million, and although the loss narrowed by 34%, it still incurred a loss of HK$510 million. As of the end of June this year, its net debt reached HK$1.582 billion, reflecting a state of insolvency.
Heavy reliance on related parties raises questions about independence.
More importantly, as of the end of last year, current liabilities included RMB 432 million in "payments to related parties." Meanwhile, to maintain operations, the company borrowed digital assets from related-party funds, resulting in over RMB 150 million in "digital asset payables," reflecting the company's severe financial and asset dependence on its controlling shareholder, Wanxiang Group, and its related parties.
Furthermore, the company heavily relies on services provided by Wanxiang Blockchain for its core technology development. From software development to security maintenance, its core lifeline is tied to its affiliates. This model has raised concerns in the market about its business independence and technological autonomy, with some arguing that it is more like an "operational front-end" than an independent entity with core competitive advantages.
With over 1.7 billion in redeemable liabilities, it has the characteristics of a "redemption" scheme.
Another key risk disclosed in the prospectus is the "redeemable liabilities" of up to RMB 1.725 billion, which are related to the company's issued redeemable preferred shares. This clause typically grants early investors the right to demand the company redeem their shares under certain conditions (such as failure to list or failure to reach the agreed valuation). Therefore, this IPO has a "passive redemption" character to some extent, adding enormous pressure and uncertainty to the company's listing process and valuation negotiations.
Platform tokens are controversial and the industry's future is uncertain.
On the other hand, the economic model and user reward mechanism of HashKey's platform token HSK have also become a focus. The prospectus shows that as of the end of last year, the company had RMB 189 million in "contract liabilities," mainly corresponding to HSK tokens distributed to users but not yet unlocked. Some market analysts have pointed out that the HSK token previously exhibited "high fully diluted value (FDV), low circulating supply," and its price performance after launch fell short of expectations. Its airdrop rules also sparked discussions among some community users regarding fairness, and the token's long-term value support and ecosystem applications still need further clarification.
Besides individual stock factors, the recent volatility in the cryptocurrency market is also one of the risks for HashKey. On the one hand, the price of Bitcoin has been weak since it hit a record high of $126,000 in October, once falling to nearly $80,000, and is currently hovering around $92,000, still down about 27% from its high. On the other hand, the People's Bank of China previously held a meeting of the coordination mechanism for combating speculation in virtual currency trading, mentioning that stablecoins are a form of virtual currency and currently cannot effectively meet the requirements for customer identification, anti-money laundering, etc., and are at risk of being used for illegal activities such as money laundering, fundraising fraud, and illegal cross-border transfer of funds.
Guoxia Technology has the potential to be a target for speculation in Hong Kong stocks via the Stock Connect program.
Guoxia Technology's subscription period will close this Thursday. The public offering ratio is 10%, and Mechanism B is adopted, meaning there is no clawback mechanism. The global offering consists of approximately 33.85 million shares, with 100 shares per lot, totaling 33,853 lots for Groups A and B. Three cornerstone investors were introduced: Huikai Hong Kong, Dream'ee HK Fund, and Wusong Capital, who subscribed for a total of HK$74.25 million, representing 10.91% of the total offering, a relatively small percentage.
This stock has a greenshoe option and is exclusively sponsored by Everbright Securities. Historically, it has only sponsored one IPO, which fell below its issue price on the first day. However, it's worth noting that Livermore, a non-sponsor, is acting as the greenshoe option and has a good reputation. Furthermore, although Guoxia Technology's market capitalization is as high as HK$10.2 billion, its H-share market capitalization is only about HK$7.7 billion, creating an incentive for further price increases in hopes of inclusion in the Stock Connect program.
Guoxia Technology's stock price could be further driven up in anticipation of its inclusion in the Hong Kong Stock Connect program.
Product structure changes have led to a sharp decline in gross profit margin in recent years.
The Group is a renewable energy solutions and product provider in China's energy storage industry. Last year, it recorded revenue of RMB1.026 billion, a year-on-year increase of 2.26 times, and earned RMB49.119 million, a year-on-year increase of about 75%. In the first half of this year, it recorded revenue of RMB691 million, a year-on-year increase of 6.62 times, and turned a profit of RMB5.575 million, compared with a loss of RMB25.59 million in the same period last year.
Comparatively, the declining trend in gross profit margin is more noteworthy. The stock's gross profit margin fell from 25.1% in 2022 to 15.1% in 2024, and further to only 12.5% in the first half of 2025—a drop of half. This reflects a significant shift in the group's product structure in recent years, coupled with intense competition and a potential for drastically compressing profit margins in order to secure orders.
The prospectus also shows that the largest revenue contributor has shifted from residential energy storage system products and solutions in the European market in 2022 to large-scale energy storage system products and solutions in China in 2024. The Group explained that this shift reflects a dynamic response to market opportunities and policy developments, rather than a fundamental change in its business focus.
Intense market competition leads to increased accounts receivable
In fact, the large-scale energy storage market in mainland China is highly competitive, with constant price wars, including giants such as CATL (3750) and BYD (1211). According to a report by Frost & Sullivan, there are more than 300 participants in the mid-to-downstream segments of the global energy storage system market. Last year, the top 30 companies in the world accounted for more than 90% of the newly installed capacity of energy storage systems, of which Chinese companies contributed more than 70%.
On the other hand, while Guoxia Technology's revenue has increased significantly, its operating cash has continued to flow out. For the years ended 2022 and 2023, and for the six months ended June 30 this year, cash outflows were approximately RMB 30.3 million, RMB 72.9 million and RMB 205 million, respectively. The reasons behind this are the increase in trade receivables and a significant increase in inventory. If this situation continues, it may have an adverse impact on the financial condition and operating results.
