Hello! I'm your financial analysis assistant. This article, from "Qin Shuo's WeChat Moments," was written by Huang Fan, who uses a very sharp pen to dissect a long-standing phenomenon in the A-share market that both attracts and repels countless retail investors: the stark contrast between the "craziness" during new stock (IPO) offerings and the "dismay" after they go public.
To help you easily understand this in-depth analysis, I will first summarize the key points and then break it down in simple language from five different perspectives.
📝 Summary of Key Points
The main argument of this article is clear: There are serious issues with "institutional arbitrage" and "wealth transfer" in A-share new stock offerings. In simple terms, the primary market (where stocks are issued) sets the price very high, and the secondary market (where trading takes place), due to limited supply and high market sentiment, drives the price even higher. As a result, retail investors who buy into these stocks at those high prices suffer losses as the stock price declines over time. The author uses YuShu Technology as an example to illustrate that this pattern of "high issuance price + high opening price + long-term price decline" is a combination of regulatory guidance, the issuance system, and market speculation. The author calls for more market-based approaches to new stock offerings, reducing administrative intervention and the "invitation system," allowing the market to naturally filter out quality companies rather than relying on regulatory approval.
---
🔍 In-Depth Analysis: Five Perspectives on the "Paradox of A-share New Stocks"
1. **Who's Really Buying? A Well-Laid-Out Game of Wealth Transfer**
The article starts by pointing out a harsh reality: during A-share new stock offerings, the odds of winning a bid are extremely low (one in ten thousand), yet after the stock goes public, the price often soars only to plummet later. Where does all that money go?
- Beneficiaries (Winners):
- Primary Market Investors: They buy shares at a lower price before the company goes public (for example, YuShu Technology's Pre-IPO valuation was 12.7 billion yuan, but its valuation soared to 61 billion yuan upon listing, allowing them to make a huge profit before selling.
- New Stock Winners: Lucky retail investors who buy at the issuance price of 150.8 yuan and see the price rise to 1100 yuan on the first day; even if it falls the next day, they still make a profit if they sell at that high price.
- Original Shareholders of the Listed Company: Their shares appreciate significantly as the stock price increases.
- Buyers (Losers):
- Secondary Market Investors: Those who didn't win the bid and buy in on the first day or in the days following the listing, often driven by rising prices.
- Outcome: Taking YuShu Technology as another example, the stock opened at 1100 yuan but fell to 550 yuan nine days later (a 50% drop). Those who bought at the high price not only didn't make a profit but also lost 50%.
In Simple Terms: It's like an auction where the seller (the company) and early buyers (institutions) agree on a low starting price, then deliberately create a sense of scarcity, making the public think the stock is extremely valuable and prompting them to buy. Once the public has bought out, the sellers and early buyers leave, leaving the public with overpriced stocks that eventually fall back to their true value.
2. **Why Can New Stocks Be Speculated On So Much? Four Drivers in the System**
Many retail investors see new stocks as a good investment because they have rarely declined in the past few years. However, the article argues that the issuance system is fueling this phenomenon. There are four main reasons:
- Collusion in Pricing: The issuance price is determined by investment banks and institutions, who prefer a higher price for easier financing and better performance.
- First-Day Price Determination: The price on the first day is set by retail investors and speculative funds, who also want a higher price for easier profit-making.
- Limited Supply: Few shares are available for trading immediately after the listing.
- Limited Options for Investors: There are no price limits on new stocks in the early stages, and it's difficult to short them. This means only buyers can drive up the price.
- Misaligned Regulatory Goals: The primary focus for regulators and investment banks is on successful listings, not on reasonable prices. As long as the listing is lively and the price is high, the task is considered completed.
In Simple Terms: It's like opening a new business where the owner (the company) and intermediaries (investment banks) set a high price, limit the number of buyers, and prohibit returns. As a result, people buy in despite the stock not being worth that much, hoping to buy before others can.
3. **Is the Myth of "Invincible New Stocks" Just an Illusion? Data Speaks for Itself**
Retailers often believe new stocks are always profitable, but data contradicts this:
- Increasing First-Day Gains: The average gain in 2024 was 252%, 259% in 2025, and 279% in the first eight months of 2026.
- Almost Zero Underperformance: In the past, 20% of new stocks fell on their first day; now, almost none do.
- Harsh Post-Listing Performance: 70% of new stocks in 2025 fell on the second day, and more than 70% of those bought at the first-day close resulted in losses.
- The More the Gain on the First Day, the Greater the Loss Later: The more the stock rises on the first day, the more it tends to fall later.
In Simple Terms: The myth of "invincible new stocks" applies only to those who win the bid and early institutional investors. For most retail investors, buying new stocks means becoming the ones who absorb the losses when the price drops.
4. **Why Do Retail Investors Still Buy at High Prices Despite the Risks?**
The article identifies two psychological traps:
- Confusing Scarcity with Value: The initial price surge is due to scarcity, not the quality of the company.
- FOMO (Fear of Missing Out): Seeing others make money drives them to buy, ignoring potential risks.
In Simple Terms: It's like buying limited-edition sneakers; people are willing to pay a high price because of scarcity and popularity, even though the product may not be worth it. Once they buy, they realize the regular version is just as good, and the price drops.
5. **Where’s the Solution? Let the Market Speak, Not Rely on the “Invitation System”**
The article proposes reforms:
- Current Situation: A-share IPOs are somewhat like an "invitation system," with regulators favoring companies that align with national strategies (such as tech). YuShu Technology is a typical beneficiary of this.
- Core Argument: A planned economy approach won't identify good companies; only market competition can do so. True tech giants like NVIDIA and DeepSeek emerged through fierce market competition, not through pre-approval.
- Regulatory Role: Regulators should create a fair, open, and just market mechanism rather than endorsing specific industries or companies.
- Reform Directions:
- Further Marketization: Relax restrictions on new stock offerings to let supply and demand determine prices.
Regularize the Registration System: Regulators should focus on ensuring compliance during the listing process rather than who can list.
Long-Termism: Only when new stocks are no longer scarce and prices are reasonable will investors truly evaluate company fundamentals.
In Simple Terms: The current approach is like a teacher selecting "top students"; the real top students emerge through market competition. Regulators should create a fair environment and let the market determine the best companies.
---
💡 Lessons for Ordinary Investors
1. Be Cautious of the "New Stock Myth": Don't blindly buy new stocks on the first day if you didn't win the bid; it's likely to result in losses.
2. Distinguish Between Emotion and Value: The first-day price reflects market sentiment and scarcity, not the company's value. Long-term success depends on profitability, not initial gains.
3. Focus on Fundamentals: In the A-share market, companies with strong competitive advantages and good cash flows are more likely to be profitable in the long run.
4. Understand the System: Understanding the logic behind new stock offerings helps you avoid becoming victims of inflated prices.
I hope this breakdown helps you see through the surface of financial news and find a more rational investment perspective.