By Lauren Hirsch and Sruthi Shankar
(Reuters) - Shares of Chinese package delivery company ZTO Express <ZTO.N> fell 15 percent from the company's IPO price in its U.S. market debut on Thursday, despite having raised more than expected at $1.4 billion the night before.
The stock performance showed that underwriters may have overestimated investors' enthusiasm for the largest IPO by a Chinese company since the $25 billion IPO of e-commerce giant Alibaba Group Holding Ltd <BABA.N> in 2014, sources said.
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ZTO's IPO, which had been expected to raise $1.33 billion, raised $1.4 billion on Wednesday night, after underwriters priced the IPO at $19.50 a share, above its previously indicated range of $16.50 to $18.50 a share.
"The share placement was not in long-term hands, and selling begets selling once you break IPO price," said Kathleen Smith, principal at Renaissance Capital, which manages IPO-focused exchange traded funds.
The deal came to a volatile market, with a looming election and uncertainty around interest rates. Shares of recently hot IPOs such as Acacia Communications Inc <ACIA.O> Twilio Inc <TWLO.N> were down. Only seven IPOs out of 16 that priced in October were trading above their IPO price.
"The air is starting to come out of these highly valued technology companies" Smith said
ZTO's IPO comes after lull in U.S. IPOs from Chinese firms, which had plunged to just $309 million from five deals in 2015, after a record $29 billion in the previous year because of Alibaba's listing. Year to date, there have been six Chinese IPOS in the U.S., according to Thomson Reuters data.
Chinese companies, particularly not-yet-profitable technology firms, often prefer the U.S. market, looking to tap its large pool of fund managers more familiar with startup investing. A U.S. IPO can broaden the company's profile.
"It feels like coming to the U.S. market can help the company open more doors to business partners and also have a platform to raise its brand awareness among potential customers" Xing Liu, a partner at Sequoia.
Despite market jitters, ZTO Chief Financial Officer James Guo was optimistic about the company's future.
"Its quite usual to see some volatility in the stock price and it is the best to leave it to investors in the market. As long as we focus on executing our business values and create value in the longer term, the stock price can take of itself" Guo said.
ZTO will have a dual-class share structure that will give founder Lai Meisong 80 percent voting power in the company, even though he will only hold 28 percent of the stock after the IPO. Dual-class structures, which are used by U.S. companies such as Facebook Inc <FB.O>, can be preferred when a founder is closely associated with or wants to keep close control over the company.
Most of Lai's shares are Class B ordinary shares carrying 10 votes, while Class A shares, including the new U.S. shares, have one vote. China's markets do not allow shares with different voting power.
Morgan Stanley <MS.N>, Goldman Sachs Group Inc <GS.N>, China Renaissance, Citigroup Inc <C.N>, Credit Suisse AG and JPMorgan Chase & Co <JPM.N> are among underwriters for the listing.
(Reporting by Lauren Hirsch in New York and Sruthi Shankar in Bengaluru; Editing by Tom Brown and Cynthia Osterman)