Shares of online publishing and e-book company China Literature got off to a roaring start on their first day of trade in Hong Kong, surging as much as 100 percent in the morning session.
The company raised a total of 8.3 billion Hong Kong dollars ($1.1 billion) after pricing its 151 million share offering at HK$55 ($7.05) — the top of its range — apiece. Ahead of its debut, shares of China Literature had been overbought by more than 600 times.
As of 1:00 p.m. HK/SIN, shares of the online literature platform traded at HK$105 — that's about 90 percent above its issue price.
Part of the reason for the astronomical jump in the company's share price has been its affiliation with internet giant Tencent, which owns around 62 percent of China Literature's issued shares.
"The key point is Tencent," Kenny Wen, a Hong Kong-based strategist at Sun Hung Kai Financial, told CNBC.
As online literature was not as large of a phenomenon in Hong Kong as it was on the mainland, Hong Kong retail investors unable to understand China Literature's underlying business proposition were likely buying the stock based on name recognition, he indicated.
For those investors, there was the hope that "China Literature may be another Tencent," Wen explained.
China Literature generates revenues from intellectual property licensing, the sale of physical books and charging readers for access to its online content library. Some 6.4 million writers and 9.6 million works were available on its platform at the end of June this year, the company said in its prospectus.