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ZTO Stock Debut - What You Need to Know

investment opportunitiesThe ZTO stock debut is here. Chinese logistic company ZTO Express (NYSE: ZTO) made its stock debut today in the biggest U.S. initial public offering of the year.

Here's everything investors need to know about the ZTO stock price now...

ZTO raised a whopping $1.4 billion in its IPO as its backers eagerly moved to cash in on China's explosive online shopping industry. ZTO delivers parcels for businesses, including Chinese e-commerce goliaths Alibaba Group Holding Ltd. (NYSE: BABA) and JD.com Inc. (Nasdaq ADR: JD).

ZTO agreed to sell 72.1 million shares at $19.50 each. The price is above the range of $16.50 to $18.50 a share set prior to the company's global roadshow. That indicates strong early demand for ZTO stock.

Shares start trading today (Thursday) on the NYSE under the ticker ZTO.

ZTO says it will use much of its IPO proceeds to buy land, build facilities, and buy equipment to grow its sorting capacity. IPO funds will also be used to purchase more trucks, invest in information technology, and for potential strategic transactions.

The head underwriters for the ZTO IPO are Morgan Stanley (NYSE: MS) and Goldman Sachs Group Inc. (NYSE: GS). Also working on the deal are China Renaissance, Citigroup Inc. (NYSE: C), Credit Suisse Group AG (NYSE ADR: CS), and JPMorgan Chase & Co. (NYSE: JPM).

The ZTO stock debut is not just the biggest of 2016, it is also the biggest by a Chinese company since Alibaba went public in September 2014. ZTO has a market value of more than $12 billion.

The ZTO IPO has garnered a great deal of interest. Here's why and how to play the hyped-up ZTO stock debut...

How to Play ZTO Stock Following IPO

China is the largest market for delivery services in the world. According to CNBC, China's total parcel volume in 2015 was 20.7 billion. That's approximately 1.5 times the total parcel volume of the United States.

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The bulk of the business is generated from China's e-commerce space, yet a great deal remains untapped. Gross merchandise volume (GMV) hit $609 billion in 2015. By 2020, that figure is expected to hit $1.465 trillion.

ZTO is the second-biggest delivery provider with 14% of the market. And it has a huge revenue stream already.

The company is projected to log sales of $1.5 billion by the end of 2016, according to Renaissance Capital, a manger of IPO-focused ETFs.

But there are reasons to proceed with caution.

Roughly 75% of ZTO's volume comes from Alibaba. And competition continues to strengthen.

ZTO has acknowledged it has had to cut prices to remain competitive and may be subjected to more downward pressure. Additionally, the company said it may be difficult to control costs.

Getting in on a hot IPO is exciting, but it is not the best investment decision for retail investors.

Money Morning experts recommend following these three IPO investing rules:

  1. Wait until the frenzy dies down and the lock-up period ends. The lock-up period is the stretch of time after a company goes public in which insiders and early investors can't sell their shares of the stock. It typically lasts 90 to 180 days after the company hits the market.
  1. Before buying a new stock, wait for a couple of quarterly earnings reports. You want to see if the company is profitable and if its profits are sustainable.
  1. If you do play an IPO, always use a limit order on buys and sells. The market moves fast, and price swings can be wide. Don't chase shares, which can be risky - and costly.

Editor's Note: We've found a special profit opportunity for investors, but there are only a few days left to get all the details...

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