Decline in Foxconn unit’s share price warning to investors of unicorn hype

LAST WEEK, China’s A-share market witnessed a dramatic fall that should be a warning to the current unicorn speculation in the A-share market. Beijing News comments:

The plummeting of Foxconn’s share price should undoubtedly be a warning to the current unicorn speculation in the A-share market.

This year, the outlet of the A-share market has changed, with the green light given to unicorns, startups with a valuation of $1 billion or more.

When Foxconn Industrial Internet Co Ltd, a unit of the world’s largest contract manufacturer, became China’s biggest domestically listed technology company by market cap, its shares soared the maximum 44 percent on debut. But its share price has dropped from a high of 26.36 yuan ($4.05) to 17.53 yuan, which means it is now close to the opening price of 16.52 yuan when it was initially listed on June 9.

Investors should refrain from joining the blind chase, as the hotheaded sensationalizing of the unicorns, although it may bring about immediate profits, only serves to boost the volatility of the stock market.

The fall of exaggerated high share prices can hardly be avoided. Investors should be cautious and not speculate excessively on newly listed unicorns. It is more rational to profit from buying the initial public offerings than taking part in the speculation afterward, which harbors considerable investment risks.

Investors in the Hong Kong stock market appear more rational, as the share prices of unicorns often fall below their initial offering prices for a while before a possible rebound. The short chill of the unicorns in the stock market not only reflects the investors’ maturity, but also serves as a test of companies’ profiting ability in the long run.