（Singapore, 04.09.2026）Hong Kong’s booming initial public offering market is changing the way shares are handed out, with companies increasingly taking a direct role in deciding which investors receive allocations as competition for the hottest new listings intensifies.
More than 100 companies that have listed in Hong Kong this year delivered a weighted-average first-day gain of about 28%, according to Bloomberg data, making access to popular IPOs increasingly valuable. Rather than leaving allocation decisions largely to investment banks, some companies are reserving shares for strategic investors, suppliers, customers and other investors with existing relationships, while traditional institutional funds sometimes walk away with smaller allocations or none at all.
The shift comes as Hong Kong’s IPO market heads towards potentially record fundraising, driven in large part by Chinese companies linked to the artificial intelligence supply chain seeking capital to expand. Strong investor demand has transformed the allocation process from one dominated by relationships between fund managers and investment banks into one where company executives themselves can have considerable influence.
“One part of the process that has perhaps changed the most between the pre-Covid investing period and post-Covid is that the management teams very directly get involved in choosing their investors,” Vikas Pershad, an Asia equities portfolio manager at M&G Investments, told Bloomberg.
One of the clearest examples came from printed circuit board maker Victory Giant Technology Huizhou, whose shares jumped 50% on their first trading day in April after the company completed a US$3 billion Hong Kong listing.
Company executives were heavily involved in selecting investors, with more than 20% of the offering going to some of Nvidia’s largest shareholders because Victory Giant’s chairman wanted its shareholder base to resemble that of one of its most important customers, according to people familiar with the transaction. Suppliers, Chinese funds with existing relationships and cornerstone investors also received allocations.
Similar competition emerged during Lingyi iTech Guangdong’s Hong Kong listing in June, when more than a third of the nearly 300 institutional investors that submitted bids failed to receive shares. People familiar with the deal said the company’s management was closely involved in deciding the allocations.
Giving shares to familiar investors is not new in Hong Kong, but their role has changed significantly. During the weaker IPO market that followed the pandemic, investors with close connections to companies were sometimes brought in to help listings that struggled to attract sufficient institutional demand.
Today, the opposite is happening in some of the hottest deals, with companies able to reward business partners and long-standing investors with access to IPO shares that have the potential to rise sharply after listing. Some issuers are also looking to favour investors who began engaging with management well before an IPO rather than funds viewed as short-term buyers.
That can be frustrating for institutional investors that spend months researching a company, meeting management and travelling for discussions, only to receive a small allocation when the IPO finally reaches the market. For investment firms, building relationships with potential issuers before they go public is therefore becoming increasingly important.
Zhongji Innolight, another Nvidia supplier, demonstrated how companies can remain closely involved even when institutional demand is exceptionally strong. Its US$7.8 billion Hong Kong offering, the city’s largest in seven years, allocated only a small proportion to investors described as “friends and family”, but management still played a significant role after meeting prospective shareholders before the listing to ensure they understood the business.
Strong Debuts Bring New Risks
The excitement surrounding Hong Kong IPOs has nevertheless started to show signs of cooling, with more than half of the city’s 10 largest listings this year now trading below their offer prices.
Victory Giant, despite its 50% first-day surge, is now trading about 4% below its Hong Kong IPO price. Lingyi has fared even worse, closing above its offer price on only two trading days since its June debut.
The reversal highlights the risks of using strong initial demand as an indication of longer-term performance, while the growing influence of issuers over allocations is also raising questions about pricing and transparency.
Tom Chau, president of the Hong Kong Chartered Governance Institute, warned that closely managing a significant portion of an IPO’s allocations could distort pricing, particularly in smaller offerings. Undisclosed allocations to closely connected investors could also create concerns about whether demand accurately reflects broader market interest.
Hong Kong regulators are already paying greater attention to how IPO books are built and shares are distributed. The Securities and Futures Commission has broadened its scrutiny of bookbuilding and allocation practices, according to people familiar with the matter.
In July, the regulator ordered online brokerage Futu Holdings to freeze as much as HK$125.2 million (S$20.23 million) in assets linked to an entity suspected of creating a false or artificial appearance of demand for IPOs.
Retail investors, meanwhile, face their own challenge in securing shares after Hong Kong Exchanges and Clearing introduced a mechanism last year designed to ensure institutional investors receive the majority of shares in heavily subscribed offerings. Cornerstone investors can also take up a large part of an IPO, sometimes as much as half, leaving fewer shares available during the main bookbuilding process.
For some companies, however, choosing investors can serve a broader business purpose beyond supporting the share price. Biotechnology firms, for example, may allocate shares to contract research organisations or other industry partners with which they can exchange customers, market information or pursue future business opportunities.
As Hong Kong’s IPO pipeline continues to attract Chinese technology and AI-related companies, the competition for allocations is therefore moving beyond simply submitting the biggest order. Fund managers increasingly need to build relationships with companies well before they reach the market, while regulators are watching closely to ensure that increasingly selective allocation practices do not undermine fair pricing, liquidity or investor confidence.
