Behind Unitree’s plunge: China’s premature robot boom

(Edited and refined by Grace Chong, with the assistance of AI translation.)

Unitree Robotics, China’s first publicly listed humanoid robot company, has seen its share price soar and plunge within a week of its debut, nearly halving from its debut peak. The sharp swings have fuelled concerns about bubble risk in the humanoid robot industry.

Analysts say bubbles are not unusual as emerging industries develop. The bigger concern is that some companies are entering the public market before they have moved past their high-risk phase, creating a mismatch between investors’ risk-absorbing capacity and the risks the companies face.

A spectacular debut, followed by a sharp fall

Unitree Robotics was listed on the Shanghai Stock Exchange’s STAR Market on 19 August. The stock, priced at 150.80 RMB (US$22.44) at its IPO, surged to 1,100 RMB immediately after the market opened on its first day of trading, ending the session 460% higher. The following day, however, its share price plunged 18.7% and continued to slide.

By the close of trading on 25 August, Unitree Robotics had fallen to 602.80 RMB, down a marginal 0.05% on the day. Compared with its first-day opening price, the stock had lost 45.2%, wiping 200.8 billion RMB off its market capitalisation.

The company, one of the world’s largest humanoid robot manufacturers, had already sparked a frenzy among investors during its IPO. Of the 40.44 million shares offered to the public, only 9.7 million were available for online subscription. The allocation rate was just 0.018%, prompting investors to joke that securing shares was “like winning the lottery”.

Multiple factors drove the rally

Shen Meng, director of Chanson & Co, told Lianhe Zaobao that Unitree Robotics’ valuation swings were the result of several factors working together.

“The factors that drove up Unitree’s share price also contributed to its subsequent decline,” he said.

Shen said ChangXin Memory Technologies (CXMT), a memory chip manufacturer, became the market’s most valuable stock after its listing in July, prompting more investors to participate in “new share subscriptions” (the application for newly issued shares). Meanwhile, Unitree Robotics was another prominent policy-driven stock following CXMT. Also, the relatively small number of Unitree shares in circulation made the stock easier to manipulate, further fuelling speculative sentiment. Together, these factors drove the share price higher.

But after speculative trading sent the stock soaring on its first day, many investors moved quickly to cash out.

Some needed to free up funds to participate in the IPOs of major companies such as Yangtze Memory Technologies and Enflame Technology, which are due to enter the market. Others had begun to recognise that Unitree Robotics’ valuation had moved far beyond its fundamentals as a robotics company that has yet to achieve genuine industrial-scale applications. For these investors, it made sense to lock in their gains.

Commercialisation still has a long way to go

Only about 9% came from applications in areas of essential demand such as industrial manufacturing. More than half of that portion was for showroom tours and demonstrations.

Associate Professor Zhu Feida, an associate dean of the School of Computing and Information Systems at Singapore Management University (SMU), said when interviewed that the potential of the humanoid robot industry and Unitree Robotics’ technological innovation are both real. But there is a gap between the company’s current progress in commercialisation and what the market expects from it.

“Investors’ expectations for Unitree are too high. To some extent, they have already priced in its future growth,” he said.

Zhu said the volatility in Unitree Robotics’ share price following its listing also amounts to a stress test for the industry. He expects investors to adjust their expectations for similar companies that come to market in the future.

More robotics IPOs are in the pipeline

Unitree Robotics is not the only robotics company heading for the public markets. Several others have begun the listing process in Hong Kong and mainland China.

According to statistics, seven companies whose core businesses include robotics have so far filed for Hong Kong IPOs. Mech-Mind Robotics Technologies passed its listing hearing on 16 August.

Other companies, including DEEP Robotics, Leju Robotics and Deepinfar Ocean Technology, have also filed for A-share IPOs and are currently at the inquiry stage.

The risk of a bubble

Shen said bubbles are not unusual as emerging industries develop. The problem arises when companies enter the public market prematurely under the impetus of policy support, before they have made it through their high-risk phase. That can create a mismatch between investors’ risk tolerance and the risks faced by the companies.

“This means the secondary market is taking on excessive risk on behalf of the primary market,” Shen said. “The risks are spilling over excessively, which could make the market structure more fragile.”

This article was first published in Lianhe Zaobao as “宇树股价一周内暴涨暴跌 分析：投资者承受力与企业风险错配”.

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