Joinn Laboratories is one of several stocks that listed in Hong Kong this year that has fallen below its list price. Other companies like Baidu and Mediwelcome have fallen below their list price too.
In February, Joinn Laboratories raised HK$6.29 billion by selling 43.3 million shares at HK$151 per share. The retail portion of Joinn Laboratories' IPO was oversubscribed by over 300 times and the institutional offering was 26 times oversubscribed.
Joinn Laboratories is a leading non-clinical contract research organization focused on drug safety assessment. Over its more than 25 years of operating history, the company has accumulated extensive expertise in conducting complex research experiments that are in accordance with guidelines promulgated by major markets. As a result of its expertise and project experience, many of Joinn Laboratories' customers can improve productivity and efficiency and reduce R&D costs.
Joinn Laboratories is also in the process of expanding its services into a range of offerings covering the discovery stage, pre-clinical stage, and clinical trial stage for the drug R&D service chain. The company operates two GLP-certified facilities in China and it plans to start the construction of additional laboratories and research facilities this year.
According to Frost & Sullivan, Joinn Laboratories is the largest contract research organization in non-clinical drug safety assessment in China with 15.7% market share in terms of revenue for 2019.
Falling Below The Listing Price Not Bearish for Joinn Laboratories
Joinn Laboratories falling below its list price in Hong Kong isn’t necessarily bearish.
Joinn Laboratories stock likely fell below its list price because it was priced at the high end of its IPO indicative range and expectations may just have been a little too high.
Joinn Laboratories also hasn’t rallied because the Hong Kong market hasn’t been strong from February as China’s government has begun to unwind its pandemic stimulus program. Given that China's economy is expected to grow strongly in 2021, the government has become concerned that the economic sectors such as the housing market could overheat and cause imbalances.
Although the unwinding of the stimulus is a near term headwind, the longer term macroeconomic environment for China is still strong. President Xi Jinping believes China’s economy could double by 2035 and as a result, the Hong Kong market could have more upside. If the Hong Kong market has upside, Joinn Laboratories could have another tailwind.
Rising US Treasury yields may also have caused Joinn Laboratories to underperform since its Hong Kong IPO. US Treasuries are the safest assets in the world and rising yields in those assets has likely attracted capital from other sectors such as technology and biotech. Although US Treasury yields could potentially increase further in the next few years, the overall growth potential in Joinn Laboratories could overcome the headwind.
As a result of Joinn Laboratories’ profit growth and strong future prospects, the Shanghai listed stock of Joinn Laboratories has more than quadrupled from December 2017 and surged even more from when it originally listed in Shanghai in August 2017. Although the company has risks in competition or regulation, there could be more upside if the company continues to grow.