Want to increase your chances of winning popular new stocks? First, learn how to calculate the winning rate!

Since the Hong Kong stock new stock market has warmed up, with more and more investors participating in IPO subscriptions, high-quality new stocks have become increasingly sought after. Looking back at 2024, the 8 new stocks with the most aggressive first-day gains, 6 of them had subscription multiples exceeding 100 times, with 2 of them even over-subscribed by over a thousand times.

When encountering new stocks with explosive potential, everyone hopes to be allocated shares, and even more would be better. So, how many lots should you subscribe to be allocated shares? How to increase the chances of allocation? Let's now understand the allocation rules of new stocks in the Hong Kong market, methods to estimate the chances of allocation, and potential ways to increase the chances of allocation.

What are the allocation rules for new stocks?

在How are new stocks allocated? What are the routines?这篇文章中，我们详细讲了新股的分配，但是具体的中签分布是怎样的呢？主要有两点规则。

Firstly, the winners are independently allocated to Group A and Group B. Generally, Group A and Group B will each receive half of the volume of the public offering portion, with the two parts independently calculating the winning rate. If the amount of funds subscribed by Group B is higher than Group A, then Group B's overall winning rate will be lower than Group A, and vice versa.

Secondly, the principle of decreasing, taking care of small and medium funds subscription in the distribution. The winning rate of Hong Kong stocks' new listings is not distributed purely based on funds. For example, the winning rate for applying one lot is 10%, applying two lots is 20%, applying ten lots is 100% winning rate, moderate with one lot. The actual distribution follows the principle of decreasing, meaning that each additional lot applied for increases the winning rate, which tends to decrease.

We will use the distribution table of Kwai as an example. Kwai's subscription funds exceed trillions, with oversubscription exceeding 1000 times. If distributed evenly based on funds, Kwai's allotment rate will be less than 0.5% per hand.

In reality, based on the distribution table data, Kuaishou's subscription winning rate for one lot is 4%. Whereas, the winning rate for each lot for two lots is 2.84%, with a cumulative winning rate of 5.68% for two lots, meaning that the additional winning rate for the second lot is only 1.68% more than the first lot. This trend continues for subsequent lots, with the winning rate for three lots being 2.00% each and a cumulative winning rate of 6%, resulting in an additional winning rate of 0.32% for the third lot, significantly lower than the 1.68% for the second lot.

The decreasing rate of the winning rate for all new stocks is not as exaggerated as Kuaishou's. For some new stocks, the decrease in the winning rate for additional subscriptions may be just slightly lower than the previous lot. At the most extreme, there is a flat distribution, for example, the winning rate for applying 10 lots is 10 times that of applying one lot, but this situation is relatively rare.

Can the allotment rate be estimated?

If the new stock distribution is solely based on fund distribution, then estimating the winning rate is indeed a very simple matter, as long as you know the approximate range of the subscription funds and oversubscriptions. For example, estimating a 100 times subscription, reducing it to 50%, then the winning rate is simply 1/100 * 5 = 5%.

However, since the distribution of new stocks involves both Group A and Group B, and follows the decreasing principle, the actual estimation of the winning rate is far more complex than in the case of fund distribution.

On one hand, since the distribution of new shares is independently distributed by different groups, it is necessary to estimate the subscription multiples of each group separately. On the other hand, the specific principle of decrease varies, and is related to the subscription multiples, number of subscribers, and even the mood of the underwriters.

However, although there are several variables affecting the allotment rate, the estimation of the allotment rate is still traceable. It has a certain level of difficulty, but investing itself has its own threshold.

Specifically, for the estimation of the allotment rate, we can mainly divide it into two parts. One is the allotment rate of the second batch, and the other is the allotment rate of various levels in the first group.

Estimation of the allotment rate of the second batch

Firstly, let's look at the estimation of the allotment rate of the second batch, which can be divided into four steps.

Step one, predicting the oversubscription ratio of the public offering. Brokerage software generally updates the current financing situation from time to time, and we need to closely monitor the brokerage's financing statistics.

In a bull market with high enthusiasm for new stock subscriptions, we can focus on the brokerage's financing multiple on the first day. The final oversubscription multiple is around 4 times the first day's oversubscription multiple on average.

While in a bear market environment, the enthusiasm for new stock subscriptions is relatively slow, we need to track the brokerage margin trading statistics until the last day. The final public subscription multiple is approximately 1.4 times the brokerage's last day margin trading statistics on average.

Step two, predict the oversubscription rate of group B. Since group B starts at a subscription amount of 5 million, generally speaking, the subscription amount and oversubscription rate are higher. However, the specific increase depends on the popularity of the new shares, generally increasing with higher popularity. Therefore, the estimation of the oversubscription rate of group B needs to be multiplied by a factor based on the overall public offering estimation.

For example, for public offerings oversubscribed by more than 500 times, the average multiple for group B is 50% higher than the overall multiple.

For oversubscriptions of 100-500 times, the average multiple for group B is approximately 30% higher than the overall.

For oversubscriptions of 50-100 times, the average multiple for group B is approximately 10% higher than the overall.

For oversubscriptions of less than 50 times, the multiple for group B may be similar to the average, or even lower than the average.

Step three, calculate the estimated average winning rate of group B. The calculation of the oversubscription rate is based on the pre-draw, with a multiple after the draw. The estimated average winning rate of group B = draw multiple / estimated oversubscription multiple for group B.

For example, if the estimated public offering is 100 times, the estimated oversubscription for group B is 130 times, and the draw multiple is 5 times (the public portion draws from 10% to 50%), then the estimated average winning rate for group B is 5/130 = 3.85%.

Step four, estimate the average winning rate of the top subscribers in group B. Group A will take care of the first-hand winning rate, so group B will also take care of the top subscriber winning rate. The specific level of care also depends on the underwriter's mood. On average, the top subscriber winning rate is approximately 1.4 times the average winning rate of group B.

Estimated subscription rate for each tier of Group A

Let's take a look at the estimated subscription rate for each tier of Group A, it can be divided into two steps.

The first step is to calculate the estimated multiple for Group A based on the overall oversubscription ratio of the previous public offering and the multiple of Group B, which is quite simple. The formula is: (Public offering oversubscription ratio) * 2 - (Group B multiple). For example, if the estimated oversubscription ratio of the public offering is 100 times, and the estimated multiple for Group B is 130 times, then the estimated multiple for Group A would be 100 * 2 - 130 = 70 times.

The second and most crucial step is to find a benchmark. Among the new stocks that have already been listed historically, select a few with subscription multiples similar to Group A for comparison with the current new stock. These selected new stocks should have recall rules consistent with the current new stock, and the financing scale and number of subscribers should not differ too much.

Among these historical new stocks, choose one or two that are moderately allocated (neither significantly biased towards small Group A nor significantly biased towards large Group A) for comparison. The benchmark for comparison is based on the amount, not on the number of shares.

Taking Midea Group Co., Ltd as an example, with an estimated oversubscription multiple for Group A between 2.5-3 times, we can select TOPSPORTS from historical new stocks in the Hong Kong stock market as a benchmark.

TOPSPORTS has a Group A multiple of 2.5 times, a financing scale of several billion, and 0.013 million subscribers, which is quite similar to Midea's issuance situation.

In fact, we can compare the allocation of two new stocks, although not exactly the same, they are indeed extremely similar.

Of course, the examples we compare here are just retrospective reviews. The actual oversubscription multiple estimation may have errors, and even if the estimation is very accurate, there will be differences in the allocation of different new stocks.

However, although no one can guarantee a 100% estimation accuracy, at least through the estimation of the winning rate, you can have an idea of the order of magnitude of the positions you can win. For experienced investors, by estimating the winning rate and diversifying subscriptions at various purchase levels, it is possible to control the error of the total winning position within 20%.

How to increase the IPO Subscription winning rate?

For new stocks with low subscription multiples, since the winning rate is already high, the focus should be on the downside risk and position control.

But for new stocks with high potential for price increase, the subscription multiples may be high. Even if the amount of winning in full subscription may be limited, the focus at this time is on how to increase the winning rate. There are mainly two methods.

The first method is to use financing for subscription. In addition to the available cash in the account or mortgage purchasing power, you can also borrow money from banks to subscribe to new stocks, thus increasing the winning rate by purchasing more new stocks. For most popular new stocks, Futu will provide leverage of 10 times, 50 times, or even higher from the bank for financing, and no bank financing interest is charged, which can be said to be a magic tool to increase the winning rate in IPO subscriptions.

For example, by subscribing through Futu, you can obtain up to 200 times leverage from banks, significantly increasing the chance of winning the symbol! $BLOKS(00325.HK)$ , you can obtain up to 200 times leverage from banks, significantly increasing the chance of winning the symbol!

The second method is to utilize the decreasing principle of the distribution of HK IPO shares, which is beneficial for small and medium capital subscription. For example, for a particular new stock, with a 0.1 million Account using 10 times bank financing, one can apply for nearly 1 million amount, and the possible successful allocation may be 0.015 million. While with two 0.05 million Accounts, each account can apply for nearly 0.5 million amount, and the potential successful allocation for each account may be 0.01 million, totaling 0.02 million.

In summary, for the allocation rules of HK IPO shares, there are mainly two points: the first point is the independent allocation of two groups A and B, and the second point is the decreasing principle, prioritizing small and medium capital subscription.

For estimating the success rate for HK IPO share allocation, we can calculate the success rate of Group B and the various levels of Group A by estimating variables such as the over-subscription multiples of groups A and B. Although there may be errors, it is still valuable for controlling the amount of successful allocation and loss risk.

To improve the success rate for HK IPO share allocation, we can consider using Brokerage provided financing subscription, and reasonably utilize the decreasing distribution principle beneficial for small and medium capital subscription.