Two medical device companies, both utilizing "Mechanism B" and listing without a greenshoe option, arrived on the Hong Kong stock market almost simultaneously, yet COFOE MEDICAL (01187) and Tianxing Medical displayed entirely contrasting market performances. On May 5th, Tianxing Medical (01609) debuted, issuing shares at a fixed price of HK$98.50. After opening, its share price surged to a high of HK$299 per share, an increase of over 199%. Although its gains significantly pared back later in the session, it still closed up 118.27%. Notably, in the previous day's dark pool trading, Tianxing Medical's intraday surge once exceeded 400%, closing with a gain of over 200%, highlighting intense market interest. In contrast, COFOE MEDICAL, despite having a lower entry cost, more cornerstone investors, and the safety cushion of an A-share discount, delivered a comparatively subdued performance. Observations indicate that while Tianxing Medical saw closing gains exceeding 200%, COFOE MEDICAL's performance was stable. During the May 5th dark pool session, COFOE MEDICAL closed at HK$40.02 on both the Phillip Securities and Levermore dark pools, a gain of 1.75%; the Futu dark pool closed at HK$40.20, up 2.21%. This performance indirectly reflects some valuation support pressure, a sentiment further evident in COFOE MEDICAL's trading on May 6th. On May 6th, COFOE MEDICAL made its market debut. Within the first 5 minutes, its share price fell nearly 8%, and within 15 minutes, it hit the day's low of HK$35.50, a drop of 9.74% from the issue price. However, after the midday break, the stock experienced a sudden rally, turning positive before ultimately retreating from its highs to close down 1.09%.
Is Mechanism B not to blame this time? According to the issuance plan, COFOE MEDICAL globally offered 27 million H-shares (representing 15% of the total shares post-issuance), with 90% allocated internationally and 10% publicly. This H-share offering explicitly did not include an over-allotment option. The shares were priced at the top of the range, HK$39.33 per share, raising up to HK$1.062 billion. Each board lot consists of 100 shares, with an entry cost of HK$3,972.7 per lot. Regarding cornerstone investors, COFOE MEDICAL introduced 12 cornerstone investors for its Hong Kong IPO, including Lens Technology (300433.SZ), Changsha Yufeng, Yuanxin Investment, Panjing Fund, FR M CONSULTING, Hanqingda Industrial, Dacheng International, Zhongkang Technology (02361.HK), ODI TRUST, Huang Xuelin (Chairman of Shenglan Technology (300843.SZ)), Dai Jun'an (Director and General Manager of Yunling, a subsidiary of VIVO Group), and Lu Qinchao (Founder of Danlu Capital). These 12 cornerstone investors collectively subscribed for 9.6543 million shares, involving approximately HK$380 million. Analyzing COFOE MEDICAL's issuance strategy, while it utilized "Mechanism B," it did not adopt a strategy similar to Huazi Bio's "Mechanism B + no cornerstones" with a high entry barrier. Instead, leveraging the safety cushion of its A-share discount, it opted for a multi-cornerstone strategy, with the cornerstone subscription ratio of 35.76% being within a common range. Furthermore, the total number of shares offered publicly was 2.7 million, equating to 27,000 board lots, evenly split between Group A and Group B at 13,500 lots each. The entry cost per lot was only HK$3,972.67, making it retail-investor friendly. It is worth noting that COFOE MEDICAL's issuance did not include a greenshoe option. While this arrangement introduces short-term share price volatility risk post-listing, a core advantage is its eligibility for inclusion in the Southbound Stock Connect scheme on its debut day due to its "A+H" status. Even with its relatively modest A-H discount of 35.34%, it can still attract southbound capital for valuation arbitrage. Data shows that on the listing day, China Creation Wins and China Investment, two Southbound Stock Connect channels, were the top two net-buying brokers for COFOE MEDICAL, with net purchases of 1.419 million shares and 344,300 shares, respectively. However, this arrangement did not generate significant buzz for COFOE MEDICAL, primarily because market capital was clearly drawn to Tianxing Medical, which listed concurrently. For comparison, Tianxing Medical also employed a "Mechanism B + no greenshoe" strategy. Simultaneously, Tianxing Medical introduced cornerstone investors with a Beijing state-owned background: JSC International (representing Shenghai SP) under Beijing Financial, OrbiMed's Asia Partners IV, and Greater Bay Area Homeland Investments, with a total investment of $37 million (approximately HK$290 million), representing 34.71% of the offering size. Tianxing Medical issued 8.4219 million H-shares at an issue price of HK$98.5 per share, raising HK$830 million. Each board lot consists of 50 shares, with an entry cost of HK$4,974.7 per lot. Evidently, the two medical device companies had similar listing timelines and issuance strategies, yet their market receptions were completely different. Comparing initial subscription periods, Tianxing Medical saw margin financing oversubscription nearing 800 times, while COFOE MEDICAL had less than 20 times oversubscription during the same period. Ultimately, Tianxing Medical's Hong Kong public offering was oversubscribed by 7,823.13 times, whereas COFOE MEDICAL's was oversubscribed by 399.08 times. The disparity in oversubscription multiples indicates that despite Tianxing Medical's higher entry cost, retail investors were willing to increase margin leverage to improve their chances of allocation, underscoring the gap in market enthusiasm. "Mechanism B" was clearly not the primary factor influencing the choice between the two for retail investors.
Do "Steady" Stocks Struggle to Impress Investors? As players in the medical device sector, COFOE MEDICAL and Tianxing Medical conducted IPOs around the same time with similar strategies, yet their debut performances were worlds apart. Perhaps for market capital, compared to steady performers, funds prefer "compelling targets" with higher certainty and greater growth potential. Although COFOE MEDICAL operates in the broad medical device sector, its business primarily falls within the home-use medical device sub-segment. According to its prospectus, by business segment, COFOE MEDICAL's operations can be divided into three categories: sales of medical health products, contract manufacturing, and other businesses. Medical health products contribute approximately 90% of revenue and can be further subdivided into five categories: rehabilitation aids, medical care, health monitoring, respiratory support, and traditional Chinese medicine physiotherapy. The company's product portfolio covers over 200 categories, with brands including "Cofoe," "Bebitjia," "Jian'er Hearing," and "Oxygen Leader." Compared to hot sectors in the Hong Kong market in recent years like AI, computing power, and innovative drugs, the home-use medical device segment where COFOE MEDICAL operates is considered a steady consumption track, which has seen few valuation premium cases recently. In terms of financial performance, the company has maintained steady growth. From 2023 to 2025, it reported revenues of RMB 2.854 billion, RMB 2.983 billion, and RMB 3.387 billion, respectively, with corresponding gross profits of RMB 1.173 billion, RMB 1.509 billion, and RMB 1.752 billion, and net profits of RMB 253 million, RMB 312 million, and RMB 370 million. A notable point for investors in its financials is the high marketing expenses. During the reporting periods, selling and distribution expenses reached RMB 741 million, RMB 973 million, and RMB 1.158 billion, respectively. This directly led to a significant decline in the net profit margin after 2021. Data shows that in 2021, COFOE MEDICAL's net profit margin was 18.85%, but it declined markedly thereafter, hitting a low of 8.91% in 2023 and only recovering to 10.97% in 2025. Furthermore, the current selling expenses far exceed R&D investment. In 2025, R&D expenses were only RMB 87 million, less than one-tenth of the selling expenses for the same period. Therefore, at this stage, COFOE MEDICAL's growth appears to be driven more by channel marketing than by technological innovation. Beyond fundamentals, the composition of COFOE MEDICAL's cornerstone investors might also have influenced investor choice. Data indicates that in the first four months of the year, Hong Kong IPO fundraising led globally, with 47 new listings raising over HK$150 billion. The number of new listings increased nearly threefold year-on-year, while the funds raised surged over sixfold. Against this backdrop, numerous high-profile cornerstone investors emerged. Global asset managers and sovereign funds like UBS, Morgan Stanley, Goldman Sachs, BlackRock, and Temasek became frequent cornerstone participants in hot sectors and specific stocks. Additionally, major public fund houses like GF Fund, China Asset Management, and E Fund actively participated in Hong Kong IPO cornerstone investments. Although COFOE MEDICAL's Hong Kong IPO attracted as many as 12 cornerstone investors, none were globally renowned asset management institutions or sovereign funds, making it difficult to rely on cornerstone endorsements to attract long-term capital.
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