When participating in Hong Kong IPOs, many investors focus heavily on grey market performance. However, after grey market trading ends and on the night before listing, there is another equally important document worth close attention—the IPO allocation results announcement.

Published on the Hong Kong Exchange website, this document details the subscription and allocation情况 of both the public offering and the international placing. It does not directly “predict” whether a stock will rise or fall, but it helps investors understand the true supply–demand structure of the IPO, providing valuable context for first-day trading decisions.So how exactly should one read an allocation result?

Start with the Summary: Understanding the Overall Supply–Demand Picture

The first section of the allocation results is usually a brief summary, but it outlines the most critical elements of the IPO’s supply–demand dynamics.

The first item to note is the final offer price. During the bookbuilding phase, IPOs typically set a price range, with the final price determined by demand and allocation arrangements. For companies with relatively average fundamentals, pricing toward the lower end often implies less valuation pressure. For companies with strong fundamentals or scarcity value, pricing near the top of the range usually signals robust institutional demand and may help boost market sentiment. If the IPO is priced at a fixed price (“one-price” offering), the reference value of pricing itself is more limited.

Next, pay attention to the over-allotment option on the offer size. Some IPOs reserve up to an additional 15% of shares to be issued if demand is strong. In practice, when subscriptions are sufficient, these additional shares are often fully issued. For investors, this means a larger free float at listing, which may translate into higher short-term selling pressure.

Finally, consider the overallotment option commonly known as the “greenshoe,” which can also be up to 15%. This mechanism is typically exercised only when institutional demand is strong. While it helps stabilize prices over the medium term, in the early trading phase it still represents potential supply and should be assessed together with demand strength.

Public Offering: Gauging Retail Sentiment and Short-Term Selling Pressure

Within the detailed allocation results, the public offering section mainly reflects retail investor participation and is a key window into short-term sentiment and selling pressure.

One straightforward indicator is the number of valid applications, which shows how many accounts participated in the subscription. If this number stands out compared with other IPOs in the same period, it usually indicates higher market attention, discussion, and participation enthusiasm.

Another core metric is the subscription multiple. This not only reflects retail sentiment but also directly affects the clawback mechanism. Generally, if the subscription multiple is below two times, market sentiment tends to be weak, allotment rates are higher, and selling pressure on listing is more likely. If the multiple is moderate and does not trigger a clawback, the supply–demand structure is relatively balanced and often more supportive of first-day performance.

Once a clawback is triggered, the key is not whether it occurs, but how high the subscription multiple remains after the clawback. Under the same clawback ratio, a higher multiple usually signals stronger demand absorption, helping to offset the pressure from more concentrated shareholdings.

International Placing: The Key Determinant of an IPO’s “Backbone”

Compared with retail sentiment, the international placing better reflects the true stance of institutional capital and is critical for assessing downside risk.

The first figure to examine is the institutional coverage multiple. In a weak market, achieving several times coverage is already notable; in a bullish environment, this multiple can expand significantly and become a major driver of IPO performance. Changes in institutional demand are often an early indicator of broader market sentiment shifts.

Beyond the multiple, related-party participation is also worth noting. If existing shareholders, management, or related parties subscribe to shares in the IPO, the market often interprets this as a positive signal, suggesting insiders are not fully avoiding post-listing risk.

Lock-up commitments are another detail that is often overlooked. In some cases, shareholders not originally subject to lock-up requirements voluntarily commit to additional lock-ups disclosed in the allocation results, which can help reduce potential selling pressure in the early trading phase.

As for allocation concentration, while it is frequently discussed, its implications are not absolute. Concentrated holdings do not necessarily mean price control, nor does dispersion automatically imply selling pressure. It is better treated as a supplementary indicator rather than a decisive factor.

Allocation Basis: Reading Capital Preferences from Retail Structure

The final section of the allocation results outlines the basis of allocation for the Hong Kong public offering, showing allotment outcomes across different subscription bands.

From the allocation structure, if shares are skewed toward larger applications, smaller retail investors may find it less favorable. However, historically, IPOs with such structures often show a relatively high probability of first-day gains, as shares tend to be held by investors with higher risk tolerance.

It is also useful to compare demand between Group A and Group B subscribers. If Group B shows a significantly higher subscription multiple or notably lower allotment rates, it usually reflects stronger participation from larger investors, which is generally a positive signal.

In addition, the number of “top-ticket” applications is worth watching. A higher count compared with peer IPOs in the same period often indicates more active participation from high-net-worth investors, which can support liquidity and market attention after listing.

Final Thoughts: Allocation Results Are a Tool for Understanding Probabilities

It is important to stress that allocation results are not a crystal ball for predicting share prices. Their true value lies in helping investors understand pre-listing supply–demand dynamics and capital preferences, enabling clearer probability-based decision-making.

Once you learn how to read allocation results, you can more calmly address key questions: Is market sentiment sufficiently strong? Where does selling pressure come from? Is there enough demand to absorb supply? Where are the main risks concentrated?

Often, these questions matter far more than simply asking whether an IPO will rise or fall on its first day.