China Literature shares sizzle on Hong Kong debut

China Literature Ltd, the mainland’s largest online publisher and e-book provider, made a stellar market debut in Hong Kong on Wednesday.

Price spikes came fast and furious for the Tencent-owned company, which doubled to HK$110 ($14.1) from the initial public offering price of HK$55 when the market opened for trading. The company’s shares closed the first day of trading with an 86 percent increase at HK$102.

The Hang Seng Index remained flat at 28,907.6 points on Wednesday, after rising to a fresh 10-year high on Tuesday.

Ahead of Wednesday’s official market debut, the Tencent unit jumped more than 60 percent to finish gray market trading at HK$89 on Tuesday, after briefly peaking at HK$92 in the mid-session.

“It comes as no surprise that investors’ enthusiasm remains really high, as promising tech companies have long been something of a scarce resource in Hong Kong stock market,” said Jackson Wong Chi-yeung, Hong Kong-based associate director at Huarong International Securities. “But it may be too early to say the company is poised to replicate the Tencentstyle stock performance in Hong Kong market. Its potential still takes time to be tested.”

Liang Xiaodong, one of the co-chief executive officer of China Literature, told a listing ceremony in Hong Kong on Wednesday that he was amazed by the robust investor appetite. He hoped more focus would be placed on the company’s long-term development, rather than the results of the first day of trading.

The tech giant’s publishing arm priced its stock market flotation at the top of the market- ed range, sending the amount it raised through the Hong Kong listing to more than $1 billion.

The firm has frozen roughly HK$520 billion for its listing subscription, the best performing IPO next only to China Railway Construction Corporation, which took a record amount of HK$534 billion in 2008.

Retail investors placed orders 625 times more than the number of shares on offer, putting the flotation on course to become Hong Kong’s hottest offering in 10 years.

Known for its business akin to Amazon’s Kindle Store, China Literature boasted 9.6 million literary works from 6.4 million writers as of June.

The Shanghai-based company managed to turn its business around over the first six months of the year, posting a net profit of 302.8 million yuan ($45.6 million) from a net loss of 44.8 million yuan a year earlier.

It derives its revenue mainly from charging readers to access literary works on the platform, which accounts for a staggering 85 percent of the total sales, which surged by 92.5 percent to 1.9 billion yuan for the first half of the year.