CATL's first-day public offering in Hong Kong was a huge success, with the offering receiving an oversubscription of 21 times within a short period, attracting significant investor attention. This phenomenon highlights the hot demand in the Hong Kong IPO market and the importance of the subscription mechanism. In the Hong Kong IPO market, during a global offering, typically 90% of shares are allocated internationally, and 10% are allocated through public subscription. The portion that investors commonly participate in is the 10% public offering. As for the public offering section, it is divided into two groups based on the subscription amount: A Group and B Group.

What are A Group and B Group?

In the Hong Kong IPO market, the classification between A Group and B Group is typically determined by the subscription amount, with a threshold of HKD 5 million. Specifically:

• A Group: If the total subscription amount (including any financing) is less than or equal to HKD 5 million (excluding the 1.077% handling fee for winning shares), the investor belongs to A Group.
• B Group: If the total subscription amount (including any financing) exceeds HKD 5 million (excluding the 1.077% handling fee for winning shares), the investor belongs to B Group.

Some companies may not distinguish between A and B Groups during their IPO. For instance, if a company's total market capitalization is less than HKD 400 million, the company generally will not divide into A and B Groups, or even if they do, it may not have significant practical implications. Additionally, some companies may choose to divide into A and B Groups based on their specific circumstances, but typically, larger market cap companies will have this division.

Differences in the Winning Odds Between A Group and B Group

Hong Kong IPO allotments generally follow two key principles:

1. Priority Allocation Mechanism: This mechanism aims to favor retail investors by ensuring that as many individuals as possible win at least one lot, making sure everyone has a fair chance of participation. Hence, the chance of winning for a single lot is the highest, and it decreases as the number of shares subscribed increases.
2. More Subscriptions, More Allocation: After the priority allocation, a secondary distribution takes place. The more shares an investor subscribes to, the more shares they receive.

Generally, for investors in B Group, their chances of winning are consistent regardless of how many shares they subscribe for. However, in A Group, the winning chances decrease as the number of shares subscribed increases. Therefore, it is generally considered that the winning chances at the tail end of A Group are slightly higher than at the head of B Group.

IPO Strategy: How to Choose Between A Group and B Group

In Hong Kong IPOs, investors can typically choose to participate in either A Group or B Group. The main differences between the two groups are the funding requirements and the odds of winning.

• A Group: A Group is suitable for investors with smaller amounts of capital. The required investment is relatively low, but in highly oversubscribed situations, the chances of winning tend to be lower.
• B Group: B Group requires a higher funding threshold (HKD 5 million or more). However, in certain cases where the book manager at the Hong Kong Exchange favors B Group for allocation, B Group may have higher chances of winning. Furthermore, many brokers offer leverage, allowing investors to participate with larger amounts of capital.

However, B Group does not always have a better allocation than A Group, and not all investors have sufficient funds to participate in B Group. To increase the chances of winning, many seasoned IPO investors adopt a strategy of applying with multiple accounts, spreading the funds across different accounts, and applying for one lot from each account. This increases the overall chances of winning.