Meitu Shares Crash 33 Percent After 11-Days On the Up
Yicai Global
/SOURCE : Yicai
Meitu Shares Crash 33 Percent After 11-Days On the Up
(Yicai Global) March 22 -- Meitu Inc. [HKG:1357] has hit its first sticking point after joining the Shenzhen-Hong Kong Stock Connect program at the beginning of the month.After ring for 11 consecutive trading days, the image-editing platform's market value became the highest among Fujian private companies on March 20. However, the climb stopped abruptly. Share prices plummeted as much as 33 percent in the last 90 minutes before closing two days ago, with the firm's market value diving from its peak value of almost CNY100 billion (USD14.5 billion).After the fall, chairman Mike Cai posted on social media saying he did not know how it had happened. "Daily fluctuations in our share price reached 42 percent with transactions totaling HKD3.8 billion (USD489 million)," he said. "Many people asked me what happened, I'd actually like to know myself," he added, saying people should view their investments from a long-term perspective.The sharp drop also attracted attention from regulators. The Securities and Futures Commsion and Hong Kong Exchanges and Clearing Ltd. have begun asking stock traders for transaction records. The company said as regulators had not yet commented on the matter, it also would not pass comment.After another brief dip, Meitu's share price climbed around 7 percent yesterday, but ended up down by over 8.6 percent. Its price has hovered around HKD10 (USD1.1) since entering the exchange with a share price of HKD8.5 in December, which kept ring after joining the connect program with the Shenzhen exchange."As Meitu well known to mainland investors, including the firm in the Connect program had a major effect on share circulation and price," a company spokesman said.Wen Tianna, chief executive at Partners Capital International Ltd. told Yicai Global to keep an eye on Meitu's share prices. It hasn't been long since it lted, he said, adding that the sharp decline in price may be due to investors underselling their shares.The profit model and future growth of Meitu are different from other technology companies, Wen said, which the reason why investors rush to sell. It resulted in the dramatic change of price two days ago and shows a lot of investors who bought at the initial price are now looking to cash out, he added.The price re early on benefited from inland capital after joining the Shenzhen-Hong Kong Stock Connect as well as influence from its benchmark company, Snap Inc. [NYSE:SNAP], which owns the Snapchat platform. Snap lted th month and saw its opening price of USD24 quickly re to USD29.Some market participants are pessimtic about Snap, which lacks a clear profit model. Based on long-term potential size and rk, the company's share price has been significantly overestimated, according to Brian Wieser, an analyst at market research firm Pivotal Research. After a substantial decline last week, Snap's shares fell to below USD20, down more than 30 percent.Meitu's initial offering prospectus showed revenue in 2015 was CNY740 million, 90 percent of which came from intelligent hardware revenue. The firm set to release its 2016 report next month and likely to cite intelligent hardware as a key revenue source again.When ringing the bell at the lting ceremony, Mike Cai set a goal of balancing payments th year, with the main source of growth coming from its forthcoming e-commerce business, which set to launch th month.At a press briefing for the lting, the chairman said that making a profit would be a piece of cake for Meitu. "The largest costs of e-commerce and logtics and warehousing, and the cost of access to users," he said. "The former handed over to our partners, and our user traffic high enough to not worry about user costs."The firm will need to wait and see if the e-commerce platform boosts performance and gets share prices back on top.Founded in October 2008, Meitu a digital company working in image processing and sharing, and a series of hardware and software products. It helps users create better looking images and aims to spread 'selfie culture.' As of October, the platform had acquired 430 million overseas users, making up about 20 percent of its total userbase.Follow Yicai Global on Facebook @yicaiglobal and Twitter @yicaichina.
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