Nisha Gopalan is a Bloomberg Gadfly columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.

Shuli Ren is a Bloomberg Gadfly columnist covering Asian markets. She previously wrote on markets for Barron's, following a career as an investment banker, and is a CFA charterholder.

ZhongAn Online P&C Insurance Co. is flying high, but what's the risk should its big-name backers, well, back off?

The online insurer's stock surged as much as 18.1 percent in Hong Kong Thursday after an IPO that was more than 100 times oversubscribed. Initial share sales in the city that have raised at least $500 million have risen an average 4.2 percent on their first day of trade, data compiled by Bloomberg show.

Elite Club
ZhongAn joins a handful of stocks in Hong Kong that surged on their first trading day
Source: Bloomberg
Note: ZhongAn's debut was measured in the first hour of trading in Hong Kong on Sept. 28, 2017. Data includes IPOs that raised at least $500 million.

But valuing an insurance company more like a technology firm, especially when it's projected to make a significant loss this year, is always dicey. ZhongAn's growth ultimately hinges on the close ties forged, and then maintained, between its Chairman Ou Yaping and the three Mas. ZhongAn is 13.8 percent owned by Jack Ma's Ant Financial, an affiliate of Alibaba Group Holding Ltd., 10.4 percent by Tencent Holdings Ltd., whose chief executive officer is Pony Ma, and 10 percent by Ping An Insurance Group Co., whose chairman is Ma Mingzhe. SoftBank Group Corp., a cornerstone investor, holds almost 5 percent.

The question for investors is will Alibaba, the insurer's biggest shareholder and source of almost half its premiums last year via shipping return insurance, still be willing to back ZhongAn when it gets its own online insurance license?

As Alibaba's taking control of unprofitable delivery business Cainiao Smart Logistics Network Ltd. this week showed, backers can vanish at any time. Rival ZTO Express Cayman Inc. was tagged as Alibaba's delivery service of choice before its New York listing in October last year.

Alibaba's Backing Doesn't Always Pay
ZTO Express shares have fallen since the company's stock market debut last October

The last well-received mega IPO in Hong Kong -- Huatai Securities Co.'s $4.5 billion 2015 listing -- poses a cautionary tale. The Chinese brokerage's float was also more than 100 times oversubscribed as investors rushed to buy shares in the belief that the more individual players in China's stock market, the more commissions for brokers. Chinese stocks cratered later that year, and Huatai's shares, which declined 18 percent in 2016, have languished.

Huatai Securities' shares haven't done much their May 2015 debut
Source: Bloomberg

At the moment, ZhongAn, as China's only publicly listed online insurance company, has sentiment on its side. That could be fleeting.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. Figures are from Bloomberg Intelligence, which looked at ZhongAn's structure after the float but before an over-allotment option is exercised.

To contact the authors of this story:
Nisha Gopalan in Hong Kong at
Shuli Ren in Hong Kong at

To contact the editor responsible for this story:
Katrina Nicholas at