Seemingly unaffected by the political turmoil and rancour of recent weeks, Hong Kong has witnessed its largest initial public offering of the year so far.
Smoore International, a leading Chinese e-cigarette and vaping firm, raised $918m (£734m, €812m) on Monday and is due to start trading on the Hong Kong Stock Exchange on Friday.
Analysts had predicted that the company would raise at least $800m. However, pricing its 574 million shares at HK$12.40 ($1.57) each, the top end of its prospective range, Smoore International was able to beat expectations.
According to its prospectus, before this week’s listing, the firm had secured a total of $340m in funds from ten key investors. Huaneng Trust and Prime Capital led this pack, with stock worth $80m and $50m, respectively.
Smoore’s profits surged in 2019, rising to 2.17bn ($310m) yuan from 733.9m yuan in the year before.
Although the Covid-19 crisis is expected to dent the firm’s 2020 performance, investors will no doubt be focusing on the long-term changes in Chinese smoking habits.
China has the largest smoking population in the world, with around one in four Chinese people being habitual smokers. The nation accounts for around 40 per cent of global tobacco consumption.
The Chinese government has implemented a number of measures since the turn of the century to discourage tobacco consumption, most notably its 2030 Healthy China program which seeks to reduce smoking prevalence to 20 per cent.
Vaping and e-cigarette firms have endeavoured to capitalise on such shifts in social habits.
However, this government mandated push to discourage unhealthy habits could prove a double-edged sword. The success of the likes of Smoore International will depend to a large degree on the government’s attitude to its relatively new technology.
This attitude can already be said to be mixed. Beijing has allowed Chinese e-cigarette firms such as Smoore, Yooz, RELX and FLOW to grow and attract significant levels of international investment.
However, regulators have also banned the online sales of these products and state propaganda has openly discussed the potential harm they cause.
