Mirror Mirror on the wall, who is the fairest of them all? Photo: YouTube/Snow White and the Huntsman trailer
Mirror Mirror on the wall, who is the fairest of them all? Photo: YouTube/Snow White and the Huntsman trailer

Hollywood bombshell Marilyn Monroe once said, “Imperfection is beauty, madness is genius and it’s better to be absolutely ridiculous than absolutely boring.”

Her quote best describes a volatile week for Meitu, the most popular selfie and beauty app that is said to be on every Chinese woman’s smartphone.

Meitu went on a roller-coaster ride on Monday when it surged to a record high of HK$23.05, up 171% from its initial public offering (IPO) price of HK$8.50 last December.

But the stock ended its best trading day with an 11% decline after surging as much as 28% before ending the day at HK$15.98. At its peak, Meitu was worth HK$93.3 billion (US$11.9 billion).

Just like its core business that turns an ordinary image into a beautiful one, the stock price surge is just too good to be true. The city’s stock watchdog, the Securities and Futures Commission, was understood to have inspected Meitu’s trading records since its IPO.

The Xiamen-based company has been the most-traded southbound stock this week after a record HK$3.8 billion in trades, which had a market cap of near HK$60 billion as of Thursday’s closing.

On Monday, Meitu alone accounted for 30% of the southbound stock trades, thanks to the December launch of Shenzhen-Hong Kong Stock Connect, which followed the success of the Shanghai-Hong Kong scheme that allows mainland investors to buy Hong Kong-listed mid-cap stocks. In fact, Meitu officially joined the stock connect list on March 6.

Investor skepticism greeted Meitu on its debut which could be measured by the lackluster response among retail investors to its HK$4.6 billion IPO.

Despite its popularity – the company has 1.1 billion active users on devices and at least 456 million monthly users in Greater China – it was only two-times oversubscribed because it was still a loss-making enterprise.

Meitu’s stock was below the IPO HK$8.50 offer price in the first month before rallying more than 50% this month to as high as HK$23.05 on Monday from HK$10.02 on February 28. It has eased to about the HK$15 level since Tuesday.

Some investors believe Meitu could be another Tencent Holdings, which created China’s largest online game platform and instant messaging service WeChat. Tencent surged more than 250 times in 13 years and is now the largest Hong Kong-listed company in terms of market cap.

Sharp-eyed retail investors noted that there was an irregular transfer of shares to the Central Clearing and Settlement System in January, a month before the stock gathered momentum in what they interpreted as pushing up the price after cornering the supply.

One local daily noted that an active trader of Meitu was Head and Shoulders Securities, a brokerage firm owned by Stanley Choi Chiu-fat. Choi had been a founder of Yunfeng Capital, a private capital arm of Alibaba Group chairman Jack Ma.

Head and Shoulders Securities sold some four million shares of Meitu, or about 2% of the stock turnover on Monday, according to the clearing system’s disclosure document.

Whether the popular but loss-making company will continue to its stock price rally is still anyone’s guess, but investors are strongly reminded of a funny quote.

“Bitch please, I can remove 90% of your beauty with a wet towel.”