Securing an allocation in a Chinese initial public offering has long been a gamble, but this year the odds have collapsed to almost zero, even as first-day gains soar to eye-catching levels.
Investors who managed to obtain 500 shares of AI chipmaker Moore Threads Technology Co. at its debut last week would have reaped a windfall of roughly 500% on day one, booking an estimated 287,000 yuan ($40,600) at the intraday peak. But the chance of landing those shares was staggeringly slim: the valid subscription success rate for retail buyers was just 1 in 2,750, according to an exchange filing.
China's regulators have been funnelling IPO approvals toward strategically important sectors such as semiconductors and artificial intelligence. That shift has made coveted listings even harder to access for ordinary investors. IPOs this year have drawn an average oversubscription of 4,086 times, the highest since 2021, giving retail applicants a 0.02% probability of a successful bid, Bloomberg data shows.
For many individual investors, the math is simple: the odds are low, but the payoff, if it comes, is extremely high.
Guo Zixuan, a Henan-based retail investor and full-time blogger, said he has reached a point of resignation. "It's sheer luck. There's nothing to be upset about," said Guo, who failed to win any shares in Moore Threads' offering.
"If you win, it's a blessing. If you don't, you subscribe to the next one," he said. "It costs nothing, and the reward is almost guaranteed when you do get a piece." Guo says he applies for nearly every IPO, but hasn't been allocated a single share in four years.
Participation comes at no cost for most investors: the Shanghai and Shenzhen exchanges have no upfront payment requirement, while the Beijing exchange only freezes funds temporarily. Brokerage apps, meanwhile, bombard users with alerts for new listings, making it easy to join the queue.
Retail enthusiasm has been reinforced by stellar first-day performance. Companies debuting this year across China's three exchanges have jumped an average 251% on day one. Even the weakest performer rose 6%, a dramatic contrast to 2022, when a third of IPOs closed below their offer price and average gains were around 30%.
Moore Threads' offer price of 114.28 yuan placed it in the category known locally as a "big fat ticket," referring to listings with high issue prices that amplify potential profits. Because investors typically receive 500 shares per allocation, even a modest percentage swing can yield large absolute gains.
Part of the surge reflects tighter IPO rules introduced last year. The China Securities Regulatory Commission raised listing thresholds in response to concerns that a flood of new issues was draining liquidity from the broader market. Fewer listings have heightened scarcity, and made each deal more competitive.
"The IPO market in China today is very much a planned economy," said Li Minghong, fund manager at Beijing Yikun Asset Management. "That covers not only the pace and size of fundraising, but also the choice of sectors. Hard-tech and innovative firms are given priority."
Li estimates that even active IPO subscribers earn only 1%–2% a year overall, because winning an allocation is so rare despite the huge first-day jumps.
Extreme oversubscription has deep roots. Chinese issuers have historically priced conservatively, as an unwritten guideline once kept valuations below 23 times earnings, said Zhu Zhenxin, head of Asymptote Investment Research.
On the first day of trading, buying pressure typically overwhelms selling, Zhu added. Only those who receive shares can sell, while a wave of retail buyers rushes in, convinced that "they will definitely make a profit."
High demand has concentrated particularly in sectors Beijing is promoting. Roughly half of this year's IPOs in Shanghai and Shenzhen came from IT and industrials, including robotics, renewables and chipmaking, areas at the center of China's technological rivalry with the United States.
Some IPOs saw subscription rates even more extreme than Moore Threads. MetaX Integrated Circuits Shanghai Co. was oversubscribed 2,986 times, while Xiamen UX IC Co., a communications-chip maker, saw coverage of 4,446 times.
"Chips are at the core of this bull rally," Guo said. "The authorities' commitment to building the tech sector is beyond words. I can't afford to let my guard down in the IPO lottery, especially for tech names."
