LEMO SERVICES (02539) has seen a dramatic surge of nearly 60% above its IPO price in just eight trading days, following a roller-coaster trajectory of initial pullback, sharp rallies, and subsequent consolidation. The stock's volatility reveals a classic pattern of institutional accumulation, markup, and shakeout—but what lies behind the apparent reluctance to sell?

As a leading provider of shared massage equipment, LEMO SERVICES attracted overwhelming demand during its IPO, with its public offering oversubscribed by 5,912.8 times. The stock debuted on December 3, opening with a 36.2% surge before retracing slightly. Over the next two sessions, it rallied another 60.4%, only to retreat 25.2% in the following four days amid profit-taking. However, dwindling trading volumes suggest most holders remain bullish, hinting at potential short-term upside.

**Institutional Holders Reluctant to Sell, Signaling Bullish Sentiment** Under Hong Kong’s revised listing rules, LEMO SERVICES adopted Mechanism B for its IPO, allocating just 10% (555,560 shares) to retail investors without triggering clawback provisions. The frenzied oversubscription and a 60%+ gray market premium foreshadowed its explosive debut. On its first trading day, the stock opened strong, retreated, then rebounded sharply—a sign of institutional "painting the tape" to establish price support.

**Three-Phase Price Action** 1. **Accumulation (Dec 4–5):** Volumes dried up as institutions absorbed weak hands, with prices holding firmly above the IPO level. A 8% rise on Dec 5 on thin turnover confirmed tight control by major players. 2. **Markup (Dec 8):** The stock skyrocketed 47% on heavy volume (3.97x prior day), peaking near resistance. Despite profit-taking the next day, a late-session buy-in (44.85% of afternoon turnover) revealed persistent demand. 3. **Shakeout (Dec 10–12):** Volumes collapsed further, but sporadic large buys (e.g., 61.64% of Dec 12’s turnover in the first hour) indicated selling exhaustion.

Futu Securities’ trading desk emerged as a key holder, accumulating 234,200 shares by Dec 5 and adding 75,200 more by Dec 11 without offloading—a clear "hold" signal. With retail float minimal under Mechanism B, institutional moves may dictate near-term direction.

**Historical Precedents and Risks** Past IPOs like TY Advanced (02631) and ZJ Gold International (02259) saw shakeouts lasting weeks with 12–21% dips before rebounding. However, sector-wide downturns could derail LEMO SERVICES’ uptrend, forcing capitulation.

**Fundamentals: Growth Slowing Amid Aggressive Expansion** While LEMO SERVICES dominates China’s machine massage market (50%+ share), its growth is decelerating: - Revenue CAGR (2022–2024): 55.5%, slowing to 35.9% in 2024 and 13.72% for Jan–Aug 2025. - Net margins fluctuated between 2.58% and 16.12%, with 2025’s at 15.75%. - Gross margins improved to 36.58% (up 10.73pp since 2022), but utilization rates lag expansion—daily transactions per chair fell 31% in 2024 despite a 90% device increase.

The firm’s hybrid "direct + city partner" model (48,000 service points, 533,000 chairs) faces profitability pressure, with partner margins (74%) far outpacing direct ops (30.38%). Marketing pushes on social platforms aim to boost usage, but industry growth remains modest (12% CAGR to 2024’s RMB2.7bn market; projected 15.9% to 2029).

**Valuation and Long-Term Outlook** At HK$3.5bn market cap, LEMO SERVICES misses港股通 inclusion thresholds for December. Long-term performance hinges on execution—improving chair utilization, sustaining margins, and potential shareholder returns (buybacks/dividends).

In summary, while institutional control and technical setups suggest further upside, the stock’s stretched valuation and operational challenges warrant caution. Traders may ride the momentum, but investors should await clearer fundamental traction.