Zhipu and the Scarcity Trap
A botched developer launch showed how little room for error a 1,000x revenue multiple buys.
Editor’s Note: This is FlashPoint, Hello China Tech’s premium quick-strike column on one market-moving China tech event and why it matters.
Today’s column dissects Zhipu’s HK$70 billion single-day wipeout, triggered by a developer apology letter. The service failures are fixable. The harder question is what has been powering a 524% post-IPO rally, and whether it lasts another six months.
Zhipu, China’s first pure-play foundation model company on the Hong Kong exchange, lost over HK$70 billion in market value on February 23 after apologizing to developers for a failed product rollout. Three days earlier the stock had closed at HK$725, up 524% from its January 8 IPO price of HK$116.2, at a market cap of HK$323.2 billion. I argued in December, when the company filed for listing with nine months of cash remaining, that the IPO was a fuel stop. The market spent two months disagreeing. The correction suggests it was premature.
The trouble started with GLM Coding Plan, a subscription service for developers using Zhipu’s models to write code. Demand surged after the February 12 launch of GLM-5, the company’s new flagship. Subscriptions sold out. Zhipu raised prices 30% in China, over 100% overseas, a step few Chinese AI companies have risked. Then the service buckled. Users found undisclosed compute surcharges at two to three times the base rate. Capacity collapsed as unauthorized resellers drained resources. Subscribers who upgraded to new tiers discovered no way to reverse the change. Zhipu offered refunds and service extensions. The remedies address the symptoms. What lingers is what they exposed.
