On April 28, Xizhi Technology made a stunning debut, opening more than 380% above its offer price, following an over-300% surge in the grey market. The performance quickly went viral across the market and reignited discussions around whether IPO subscriptions in Hong Kong have once again become an “easy money” strategy. Such extreme cases tend to attract new investors, but behind the narrative of high returns, many still do not fully understand what IPO subscription actually is—and how profits or losses are generated.

What Are You Really “Subscribing” To in an IPO?

In simple terms, IPO subscription refers to applying to buy shares before a company goes public, with the intention of selling them after listing for a profit. While it sounds like a classic “buy low, sell high” strategy, the key difference is that the “low price” is not determined by investors themselves, but rather set in advance through negotiations between the company and institutional investors.

In the Hong Kong market, when a company launches an IPO, it first conducts a book-building process with institutional investors to determine a price range. A smaller portion of shares is then allocated to retail investors for subscription. After submitting an application through a brokerage, the required funds are temporarily locked. If allocated shares (i.e., “winning the lottery”), investors can purchase at the offer price and freely trade the shares once they begin trading on the exchange. In essence, IPO subscription is not traditional stock trading, but participation in a transaction before the stock officially starts trading.

Why Do Some IPOs Surge on Debut?

At first glance, cases like Xizhi Technology may seem like pure luck. However, structurally, the underlying driver is supply and demand. When an IPO is highly anticipated—due to factors such as a popular industry, scarcity value, or strong institutional backing—demand can far exceed the number of shares available.

This imbalance tends to culminate on the first day of trading, when capital rushes in to compete for shares, pushing up the price sharply. In other words, the company does not suddenly become more valuable overnight; rather, the market is re-pricing it through active trading. The remarkable surge of Xizhi Technology reflects a combination of its positioning in the “AI + hard tech” sector and its perceived scarcity, which attracted concentrated capital inflows.

Why Do Many Investors Miss Out Despite Big Gains?

A common reality is that even when a new stock surges, many investors do not actually profit. The key reason lies in the allocation mechanism. When an IPO is heavily oversubscribed, the probability of receiving shares becomes very low.

For example, if one million investors apply but only ten thousand receive allocations, the vast majority effectively end up as “spectators.” This is why IPO subscription is often described as partly a game of luck. Even with correct judgment, without allocation, investors cannot participate in the gains. This dynamic is fundamentally different from buying shares directly in the secondary market.

Is IPO Subscription Really Low Risk? Why Do Losses Occur?

Many beginners view IPO subscription as a low-risk arbitrage strategy, but in reality, there is no guarantee of profit. If a company is overpriced at issuance or market sentiment weakens at the time of listing, the stock may trade below its offer price—a situation known as “breaking issue price.” In such cases, receiving an allocation can immediately translate into a loss.

Additionally, some investors use margin financing to increase their subscription size in hopes of improving allocation odds. However, this introduces interest costs. If the post-listing gain is insufficient to cover these costs, losses may be amplified. More importantly, not every IPO delivers returns comparable to Xizhi Technology. Many newly listed stocks see limited price movement or even underperform, offering modest or negligible returns.

Should Retail Investors Participate? A Key Consideration

For retail investors, there is no one-size-fits-all answer as to whether they should participate in IPO subscription. However, one critical point must be clear: this is a probabilistic game, not a guaranteed opportunity.

Entering the market purely based on the excitement of a high-profile surge often leads to overlooking the underlying selection process. In reality, outcomes are shaped by factors such as industry understanding, fundamental analysis, and assessment of market sentiment. A more prudent approach is to treat IPO subscription as a small component of an overall portfolio rather than a primary profit driver. It is also important to define a clear strategy in advance—whether to sell on the first trading day or hold through potential volatility.

Conclusion: IPO Subscription Is Not “Free Money,” but Early Market Access

The surge of Xizhi Technology highlights the return potential of IPO subscription, but it can also amplify one-sided narratives in the market. Fundamentally, IPO subscription is not an easier way to make money—it is simply a channel that allows investors to enter the market earlier.

In this process, some profit from price differences, while others benefit from informational and analytical advantages. The real distinction lies not in participation itself, but in understanding the rules of the game and maintaining rational judgment amid market hype.