Hong Kong IPO Underground Network Exposed? Underwriting Allocation, Retail Investor Harvesting, Haizhi Technology Caught in the Mix

Source: Goldstone Talk

March 19 News, On March 12 early morning, Goldstone Talk first reported on the collusion between Hong Kong-based Chinese securities firms and hedge funds engaging in insider trading to harvest retail investors. According to public information, Hong Kong authorities raided Citic Securities’ Hong Kong subsidiary and Guotai Junan International’s Hong Kong office. Now, this incident has revealed new dark secrets in Hong Kong’s IPO market.

On March 12 at noon, the Independent Commission Against Corruption (ICAC) and the Hong Kong Securities and Futures Commission announced that the operation mainly targeted insider trading and corruption, searching 14 locations and arresting 6 men and 2 women aged between 35 and 60. Among them, Samuel Pan, head of Guotai Junan’s stock market department, was taken in for investigation.

The hedge fund involved in the insider trading is Infini Capital, which gained approximately HKD 315 million in illegal profits from this transaction. Senior executives of the involved brokerage received bribes exceeding HKD 4 million. Tony Chin, founder of Infini Capital, previously worked at Morgan Stanley and HSBC. He started trading in mainland China in 2011, entered the offshore market in 2015, and attracted external funding in 2023.

According to the latest news, not only was Guotai Junan’s stock market head Pan Pan taken away, but DBS Bank’s fixed income department vice president Shen Yin has also been suspended by the Hong Kong Securities and Futures Commission. Shen Yin is married to Pan Pan.

At that time, Goldstone Talk analyzed Wind data and found that Citic Securities and Guotai Junan both participated in IPO allocations for companies such as SenseTime, Youjia Innovation, Jingtai Holdings, Yipai Sunshine, UBTECH, and Weimob Group.

Since 2025, Infini Capital has participated in H-share placings through exclusive subscriptions, including Black Sesame Intelligence, Paradigm AI, Weimob Group, GCL Technology, SenseTime, and China Ruyi. A Hong Kong analyst told Goldstone Talk that Infini Capital likely engaged in short-selling a stock and then participated in the buyback through rights issues.

What are the dark secrets behind these IPOs? Market sources suggest that this investigation mainly concerns placings. If the “root cause” is uncovered, the Hong Kong IPO market could be affected. Because many IPO projects sponsored by these two brokerages involve numerous participants, and Infini Capital’s involvement is widespread.

According to Tencent’s “Qianwang,” an anonymous tip about a “guaranteed fund” involved in Hong Kong IPOs has circulated in Central, revealing a chain of dark dealings in Hong Kong IPOs. Goldstone Talk has not yet verified the authenticity of this report, but since the reform of Hong Kong’s IPO mechanism in August 2025, phenomena like “book-building” have indeed increased.

Do you often miss out on winning Hong Kong IPO shares due to heavy investment? Have you noticed a promising investment target that keeps falling after listing? While many Hong Kong IPOs are legal and compliant, some brokerages and investment groups may have deep black hands involved in IPO “lottery” manipulation.

Let’s briefly outline the basic situation of this IPO dark secret: 1) The “ZD” mentioned in the tip may refer to ZD Global Fund, led by Huang Rui.

Goldstone Talk found that ZD Global Group was established in 2018, integrating financial investment and fintech. The group owns fund companies, asset management firms, securities firms, and other financial service institutions, with rich experience in primary market investments.

2. Book-building to harvest retail investors. As shown in the chart, Goldstone Talk identified two schemes by ZD Global, both requiring “full book-building”: one is to sharply raise the stock price after listing to meet the market cap and trading volume requirements for inclusion in Hong Kong Stock Connect, then sell off to harvest retail investors; the other is not necessarily to enter Hong Kong Stock Connect, but also involves full book-building, with market liquidity scarce, ZD Global rapidly raising the stock price after listing and then aggressively selling to harvest retail investors.

3. How does book-building work? Based on Goldstone Talk’s understanding, the general process is as follows:

In this dark chain, ZD Global offers high benefits to senior management of the target company to secure their cooperation, and also provides benefits to the chairman of the company.

After ZD Global takes over the book-building, typical fund companies—whether private or public funds, asset managers—can only get a small or no share of the stock. ZD Global then sells these shares to retail investors who want to subscribe. However, retail investors must give 70% of their gains to ZD Global, keeping only 30%.

The ultimate winners are the senior management of the listed company and ZD Global, which orchestrates the full book-building. Retail investors who participate in the allocation or buy on the secondary market become victims of harvesting.

For example, if ZD Global’s book-building profit is HKD 100 million, and 20% is given to senior management or the chairman, then 80% of the remaining profit (HKD 80 million) is split, with 30% going to retail investors and 70% kept by ZD Global. This means ZD Global can keep about HKD 56 million from a HKD 100 million profit.

The article mentions Haizhi Technology. A quick look at its stock chart shows a frenzy of price increases: a 242% surge on the first day, nearly 500% in three days, followed by heavy dumping to harvest retail investors. Currently, the stock price has halved from its peak.

Goldstone Talk found that Haizhi Technology was founded in Beijing in 2013 and listed on February 26. It is known as Hong Kong’s “AI Anti-Hallucination First Stock,” with concepts related to “shrimp farming” or large models.

Based on 2024 revenue, Haizhi Technology ranks fifth among Chinese industrial AI solution providers with a 2.8% market share; it is the leading AI core provider in China with about 50% market share.

The company mainly relies on autonomous knowledge graph + large language model fusion technology to effectively address the “hallucination” problem in AI applications (erroneous or absurd outputs), improving solution reliability and interpretability.

Performance-wise, from 2022 to 2024, revenues were HKD 313 million, HKD 376 million, and HKD 503 million respectively, with the first three quarters of 2025 reaching HKD 249 million, a 17.45% increase year-over-year. Gross margins have been steadily rising but remain below 40%.

As of now, the company has not yet turned a profit, with losses of HKD 176 million, HKD 266 million, and HKD 94 million in those years, though losses narrowed significantly in 2024. However, in the first three quarters of 2025, losses expanded by 35% to HKD 211 million. The ongoing losses are driven by high marketing and administrative expenses, which far exceed R&D costs.

Interestingly, the company has attracted investments from many star capital firms. According to the prospectus, Haizhi Technology raised multiple rounds before listing, up to Series E. Lenovo’s Junlian Capital holds 12.68%, IDG Capital’s Sky Fin holds 4.52%, and Hillhouse Capital owns 3.45%. It also received investments from Beijing state-owned capital, German, US, and other international investors.

For example, Hillhouse Capital invested in Series B, C2, and E1 rounds, with a cost basis at least 63% below the IPO price, with discounts ranging from 63% to 85%.

Using a 70% discount estimate, the cost is HKD 8.12 per share, corresponding to a market value of HKD 112 million. Currently, Hillhouse’s stake is 3.44%, with a market value of HKD 1.135 billion, yielding a paper profit of over HKD 1 billion or about 9 times the investment.

Goldstone Talk also found that among Haizhi’s cornerstone investors is Infini Capital, the same hedge fund mentioned earlier that made over HKD 300 million through insider trading. According to the prospectus, it subscribed for USD 3 million, holding about 0.22%, with an unrealized gain of USD 6.27 million, a profit of over 200%.

Another point is that Haizhi Technology’s situation aligns closely with the previous “book-building” phenomenon: first, the oversubscription rate exceeded 5,000%, with only 10% of shares available for public offering and no clawback mechanism, effectively concentrating most shares among institutional investors; second, the low success rate for retail investors in the initial allocation, combined with limited supply, facilitates post-listing price increases and subsequent harvesting.