SFC halts trading of US biotech firm over suspected manipulated IPO
Hong Kong's Securities and Futures Commission has ordered the suspension of Cloudbreak Pharma's shares pending an investigation into its 2025 initial public offering, which raised US$78 million. The regulator suspects the IPO was rigged to create an artificial impression of demand, as the retail portion was oversubscribed 77 times while the international tranche was poorly subscribed. The stock has lost over 90% of its value since listing.
The SFC's investigation centers on a stark disparity in subscription figures. While the retail tranche attracted 29,007 applicants and was oversubscribed 77-fold, the international tranche drew only 168 investors, covering just 89% of the shares offered. This mismatch fueled suspicions that the listing was engineered to simulate inflated demand.
Following the IPO, the stock suffered a 39% drop on its debut and has since fallen over 90% from its HK$10.10 launch price, closing at HK$1.19. Trading was halted at the market open on Thursday to maintain an orderly market and safeguard investors.
This case could erode retail investor trust in Hong Kong's IPO process, particularly for foreign listings. If manipulation is confirmed, it may prompt stricter regulatory scrutiny of subscription allocations, potentially deterring speculative participation while offering better protection for smaller investors. The situation also highlights the risks of investing in offerings where institutional demand is weak, as retail enthusiasm may mask underlying vulnerabilities.