Chery Automobile (CHERY) Stock: Pumps 11% on IPO, Dumps After Debut

TLDRs:

Chery Automobile shares jumped 11.2% on Hong Kong IPO debut but fell by 6.7% at close. The $1.2 billion IPO was heavily oversubscribed, signaling strong investor interest in Chery. Funds from the IPO will focus on vehicle R&D and next-generation automotive development. Chery’s stock experienced a classic pump-and-dump pattern during its first day of trading.

Chery Automobile (CHERY) made a striking entrance on the Hong Kong Stock Exchange on Thursday, as its shares climbed 11.2% shortly after trading commenced.

The rise reflected investor enthusiasm for the Chinese automaker, known for its Chery, Jetour, and iCAR brands, amid a growing appetite for electric and smart vehicles.

The stock opened at HK$34.20, above the IPO price of HK$30.75 per share, which was the top end of its indicated range. Early momentum in the stock suggested strong confidence in Chery’s growth prospects, marking the company’s IPO as the second-largest in Hong Kong this year.

Chery Automobile Co., Ltd. (9973.HK)

Oversubscribed Offering Signals Strong Demand

Chery’s IPO raised a total of US$1.2 billion, with 297.4 million shares sold to the public. Institutional investors were particularly eager, oversubscribing the tranche 11.6 times, while retail investors covered their portion an astonishing 308 times, according to company filings.

Key cornerstone investors purchased nearly half of the total offering, with US$587 million in commitments. Among them, China’s Enterprise Mixed-Ownership Reform Fund acquired approximately US$190 million in shares, and private equity group Hillhouse subscribed for US$60 million.

The heavy demand reflects the market’s high expectations for Chery as it expands into next-generation vehicles.

IPO Proceeds Target Vehicle Innovation

Last week, Chery announced plans to allocate 35% of the raised funds to research and development of new passenger vehicles.

An additional 25% will be directed toward developing next-generation automotive technologies over the next three years. These investments signal Chery’s ambition to strengthen its position in the competitive electric and smart vehicle sectors.

Executives emphasized that the company intends to broaden its product portfolio, aiming to deliver more innovative options for domestic and international markets. This strategic allocation of funds is seen as a key factor driving early investor enthusiasm during the IPO debut.

Classic Pump-and-Dump Pattern Emerges

Despite the initial surge, Chery’s stock experienced a sharp sell-off by the end of the trading day. At market close, the price dropped 6.7% to HK$31.92, demonstrating a classic “pump-and-dump” scenario where early buyers cashed in on the initial hype.

Analysts noted that such volatility is common for high-profile IPOs, particularly when demand far exceeds supply in the early stages. Investors who entered at the opening bell saw significant short-term gains, while later traders were more cautious as the price corrected.

Chery’s IPO highlights both the appeal and risks of high-demand offerings in Hong Kong’s stock market. While the company successfully raised a significant capital injection to fund innovation, early trading patterns serve as a reminder of the potential for sharp price swings in newly listed stocks.

With competition intensifying in the electric vehicle and smart car sectors, Chery’s future performance will depend on its ability to translate IPO proceeds into tangible product development and market growth.

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