On July 7th, TONGRENTANGCARE (HKEX: 02667) officially commenced trading on the Hong Kong Stock Exchange, becoming the fourth listed company under the Tongrentang Group. However, its first day of trading was met with a severe setback. The stock opened at HK$4.76, marking a 13.5% drop from its HK$5.5 issue price. During the session, it fell to a low of HK$3.06, representing an intraday decline of up to 44.36%.

Challenging IPO Journey with a Lowered Price

The path to listing for TONGRENTANGCARE has been fraught with difficulties. Since initially submitting its application in June 2024, the company filed its prospectus with the Hong Kong exchange four times. The first three submissions lapsed as the company failed to complete the offering within the required timeframe. In March of this year, the company first launched its IPO, originally scheduled for March 30th with a price range of HK$7.3 to HK$8.3, aiming to raise up to HK$898 million. However, due to a lackluster response in the Hong Kong public offering with a margin financing subscription multiple of only 4.85 times, the company proactively postponed the listing on the eve of its debut.

After a three-month hiatus, the company restarted its IPO, voluntarily lowering its expectations. The price range was reduced to HK$5.48 to HK$6.21, with the final price set at HK$5.5, near the bottom of the range. The total funds raised amounted to approximately HK$595 million, with net proceeds of HK$532 million, representing a roughly 34% reduction from the previously targeted maximum fundraising amount.

Strong Subscription Fails to Halt Pre-Market Decline

Despite the public offering being oversubscribed by 251.74 times, with a lottery success rate of just 8% for one board lot, the secondary market did not respond positively. In the grey market trading on the day before the listing, the stock closed at HK$4.67, down 15.09% from the issue price. The deep decline continued on the first trading day, making it one of the few recent cases of a new Hong Kong stock falling below its issue price amid a wave of IPOs.

Stagnant Performance Amidst Policy Headwinds

From a fundamental perspective, the market's cautious stance has a basis. From 2023 to 2025, the company's revenues were RMB 1.153 billion, RMB 1.175 billion, and RMB 1.171 billion, respectively, with a cumulative growth rate of less than 2% over the three years. Revenue in 2025 even saw a slight year-on-year decrease of 0.3%. Regarding net profit, a one-time gain from the disposal of Shijiazhuang Tongrentang Hospital of Traditional Chinese Medicine in 2024 contributed to an 8.4% year-on-year increase to RMB 46.2 million. In 2025, without such gains, net profit fell by 26.9% year-on-year to RMB 33.75 million.

At the industry level, regulatory tightening is ongoing. The company has explicitly forecasted that downward pressure on gross margins from policies such as the centralized procurement of traditional Chinese medicine decoction pieces and medical insurance cost controls will persist throughout 2026. Coupled with increased expenses related to the listing, there is a risk of a decline in annual net profit for the full year.

Three Cornerstone Investors Lock Up Nearly 50% of Shares

This IPO involved three cornerstone investors: Aviation Port Technology Capital, Aurora SF, and CICCFT, a subsidiary of China International Capital Corporation. Together, they subscribed to 53.8285 million shares, accounting for 49.77% of the offered shares. Among them, Aviation Port Technology Capital was the largest investor, contributing approximately HK$219 million to secure nearly 40% of the issued shares. However, compared to the total subscription amount of HK$389.3 million from two cornerstone investors during the March offering, the total investment from cornerstone investors in this second attempt decreased by 23.94%, even with the addition of CICC.

Regarding the use of proceeds, approximately 63.7% will be allocated to expanding the traditional Chinese medicine healthcare service network and enhancing service capabilities, 26.3% for repaying bank loans, and the remaining 10% for general working capital.