China’s Star Market turns dozens of founders into billionaires, some investors nurse losses

This article is co-written by Zhang Shidong.

Some small investors may be nursing losses after betting on the Star Market, China’s new board for technology companies. But many of the senior executives of the listed startups are celebrating a windfall.

Photo by Aaron Goodman

The frenzied buying – which has fired up the stock prices by an average of 200% since trading began on the Star Market two weeks ago – has created at least 30 yuan-denominated billionaires among those who already owned pre-IPO stakes in the companies. Someone with a fortune of 1 billion yuan is worth US$144 million.

The first batch of 25 companies on the mainland’s Nasdaq-style market posted a stellar average gain of 140% in the first trading week when shares were allowed to change hands freely without daily limits. The stocks continued to advance another 32% on average in the second week when they were subject to a 20% daily trading cap.

“The market has enabled many people to become super rich overnight given investors’ keen interest in owning shares of their companies,” said Zhou Ling, a hedge fund manager with Shanghai Shiva Investment. “But they certainly will face pressure to develop their firms into China’s own technology giants to live up to investors’ expectations.”

The Shanghai Stock Exchange has yet to compile an index to track the Star Market, also known as the Technology Innovation Board.

The Star Market, ordered into existence last November by Chinese President Xi Jinping, was designed to nurture the growth of China’s promising tech startups in the hope of creating the next Microsoft or Apple. This comes as the mainland leadership pins its hopes on technological innovation to sustain economic growth.

Based on the closing prices on the first trading day, 124 individuals who owned shares of Star Market-listed firms before their initial public offerings saw their fortunes shoot up to above 100 million yuan (US$14.4 million).

Chen Wenyuan, the 50-year-old chairman of Suzhou HYC Technology, is the wealthiest of the new crop of super wealthy founders, with his holding in the company now worth 20.8 billion yuan (US$3 billion).

Chen and his wife started the firm, which makes testing equipment for liquid crystal products, with just a million yuan in 2005.

Shares of HYC rose 2.1% to 69.92 yuan on Friday, taking the gain to 26% since the closing price of 55.5 yuan on the first day.

With the fortune from his personal stake, he would secure the 154th spot on the mainland Chinese rich list compiled for last year’s Hurun Report.

The second biggest winner was Cao Ji, chairman of Zhejiang Hangke Technology which makes lithium battery equipment. His shareholding is now worth 13.4 billion yuan (US$1.9 billion). In third place was Deng Hui who controls ArcSoft, a developer of software linked to visual artificial intelligence, with his 10.3 billion yuan fortune.