Premium or Discount? How to Understand the Pricing of U.S.-Listed Chinese Companies' Secondary Listings in Hong Kong

June 2025, $BOSS ZHIPIN-W(02076.HK)$ When new shares were issued in Hong Kong, the statement “the maximum sale price shall not exceed HK$78” in its prospectus once sparked a buzz among investors on the site. At the time, the company's US stock $Kanzhun(BZ.US)$ The price is around HK$68. As a result, many investors have questions: Will the issue price of returning to Hong Kong for the second listing be significantly higher than the US stock market price?

In fact, the “maximum selling price” here is a price cap set by Hong Kong regulatory rules to protect retail investors; it is not an expectation of the final pricing. The actual issue price needs to be determined comprehensively based on the bookkeeping and filing conditions of the international placement after the IPO is completed — the final price for BOSS's direct hire is HK$66, which is not only below the “ceiling” of HK$78, but there is also a discount compared to the US stock price. This precise pricing provided an effective “safety cushion” for investors participating in the additional offering. The stock price then rose steadily to HK$93, and brought tangible returns to investors who understood the pricing logic.

So, what are the ways for China Securities to return to Hong Kong for listing? How exactly does the pricing mechanism work? Why isn't the highest price equal to the final issue price? How should investors understand the logic behind it?

The main path for China Securities to return to Hong Kong listing: secondary listing and dual listing

China Securities can return to the Hong Kong stock market through three main methods: secondary listing, dual listing, and re-listing after privatization and delisting. The three paths have significant differences in regulatory requirements, operational complexity, and market impact, and are directly related to the company's pricing strategy. Since privatization and delisting involve high costs and a long operating cycle (usually 6-12 months), and re-applying for listing after delisting faces uncertainty in the policy and market environment, in practice, enterprises prefer to choose the two mainstream paths of dual listing or secondary listing. Not only can they achieve Hong Kong stock listing relatively quickly, but they can also expand financing channels in the Asia capital market while retaining their US stock listing status.

Secondary listing (secondary listing) means that a company lists Stocks of the same type in two places and realizes cross-market circulation of shares through international custodian banks and securities brokers. Generally, they exist in the form of depository receipts (DR for short). Specifically, Bank will first buy a certain number of shares of overseas companies, host them within the Bank system, and then package these stocks into securities products representing the corresponding shares. In the US, these securities are known as ADRs (American Depositary Receipts). $BABA-W(09988.HK)$ 、 $BIDU-SW(09888.HK)$ 、 $NTES-S(09999.HK)$ When China's securities are returned to Hong Kong, most of them use the secondary listing method.

Dual primary listing (dual primary listing) means that both capital markets are treated as primary listing locations. If a company has already been listed in the US and then issues shares in Hong Kong according to local market rules, the listing requirements are basically the same as those for an initial public offering (IPO) company in Hong Kong. Shares in the two markets cannot circulate across markets, and stock price performance is relatively independent, which may result in price differences. For example, $BEONE MEDICINES(06160.HK)$ Multiple listings have been achieved: it landed on NASDAQ in February 2016 and raised 0.182 billion US dollars; the dual listing in Hong Kong was completed on July 29, 2018, and a total of 65.6 million common shares were issued, accounting for 8.55% of the expanded share capital, and the total amount raised reached 0.902 billion US dollars.

Pricing logic: Why is the “maximum offer price” not equal to the “final price”?

The pricing mechanism for listing first in the US and then returning to Hong Kong follows a mature set of international practices. Simply put, the “maximum offering price” is a legal price cap in the prospectus. The main purpose is to protect retail investors participating in the Hong Kong public offering and ensure that their subscription costs do not exceed this price. However, the actual final issue price is determined through a market-based mechanism after the stock offering process is completed. It is usually close to the price of US stocks at the time of pricing, and often does not exceed the pre-set maximum price.

The specific pricing process mainly involves two parts:

1. Hong Kong Public Sale Section: For retail investors. According to regulatory requirements, a “maximum selling price” is set as a protective line for retail subscriptions.

2. International Placement Section: For Institutions investors, market-based pricing is carried out through road shows and gathering the needs of Institutions investors using bookbuilding (BookBuilding) methods. The pricing for this process is more flexible and there are no fixed price guidelines.

In particular, under the secondary listing structure, since a company's US-listed Depositary Receipts (ADR) and common shares listed in Hong Kong can usually be exchanged, this forms a natural arbitrage mechanism. Therefore, the final issuance price of Hong Kong stocks will closely anchor the closing price of US stocks on the previous Trade day, and may reserve small discounts for Hong Kong investors to avoid obvious room for arbitrage. This is also the so-called “no arbitrage principle.”

The final pricing is determined by joint negotiations between the company's management and underwriters to comprehensively consider factors such as the US stock market price, the needs of some Institutions investors in international placement (such as the overpurchase ratio of international placement), and the current market environment. For example, if the price of Japanese and US stocks does not exceed the maximum price set by the Hong Kong public offering after conversion, then the final price of the international placement and public sale will be basically the same and close to the US stock market price. In practice, in order to attract investors and ensure successful issuance, the final issue price is often discounted based on the US stock price.

Returning to Hong Kong through dual listing in September 2025 $HESAI-W(02525.HK)$ Take for example. The “maximum sale price” in its prospectus was HK$228, and the final issue price was set at HK$212.8. This price is very close to the closing price of US stocks at $27.74 (equivalent to about HK$216.37) on the last Trade day before pricing. Despite the dual listing, there is no mutual exchange between US stocks and Hong Kong stocks, and the issuer still uses the US stock price as the core pricing benchmark, taking into account the fairness and attractiveness of retail investors and Institutions investors.

Case review: ubiquitous “safety pads” and discounted distribution

Judging from historical data, since 2018, the average issuance discount for China Securities returning to Hong Kong projects is about -3.14%, indicating that a small discount is a common pricing strategy in the market.

Most companies focus their discounts in the -2% to -5% range, for example $LI AUTO-W(02015.HK)$ und $XPENG-W(09868.HK)$ The discount rates are -3.2% and -4.1%, respectively. Individual companies may discount more due to industry attributes, distribution size, or market environment, such as $NOAH HOLDINGS(06686.HK)$ The issuance discount is -10.1%. These differences reflect that the initial pricing will comprehensively consider the company's own situation and the market environment at the time to form dynamic and rational pricing results.