Chinese Firms Are Listing In The US At The Fastest Pace Ever, Brushing Off Tensions Between The World’s Two Biggest Economies.
Chinese Firms Are Listing In The US At The Fastest Pace Ever, Brushing Off Tensions Between The World’s Two Biggest Economies And The Continued Risk Of Being Kicked Off US Exchanges. Firms from the mainland and Hong Kong have raised US$6.6 billion through initial public offerings (IPO) in the US this year, a record start to a year and an eightfold increase from the same period last year, data compiled by Bloomberg showed.
The largest IPO is the US$1.6 billion listing of e-cigarette maker RLX Technology Inc (霧芯科技), followed by the US$947 million offering of software company Tuya Inc (塗鴉科技). That is even as Sino-US tensions show few signs of easing and the threat of Chinese firms being delisted from US exchanges remains. The US Securities and Exchange Commission last month said it would begin implementing a law forcing accounting firms to let US regulators review the financial audits of overseas companies.
Noncompliance could result in a delisting from the New York Stock Exchange or NASDAQ, it said. The risk for mainland firms is high given that China has long refused to let US regulators examine audits of its overseas-listed companies on national security concerns.
“They would acknowledge this is a potential risk, and if something happens they might need to get prepared for a rainy day,” said Stephanie Tang, head of private equity for Greater China at law firm Hogan Lovells. “But the risk itself would not prohibit those companies from going to the US, at least in the second half of this year or probably toward next year.”
Despite all the risks, the pipeline continues to grow, setting up this year to potentially exceed last year. Chinese firms raised almost US$15 billion through US IPOs last year, the second highest on record after 2014, when e-commerce giant Alibaba Group Holding Ltd (阿里巴巴) fetched US$25 billion in its float. Didi Chuxing (滴滴出行) has filed confidentially for a multibillion dollar US IPO that could value the Chinese ride-hailing giant at as much as US$100 billion, Bloomberg News has reported.
Uber-like trucking start-up Full Truck Alliance Group (滿幫集團) is also working on a US listing this year that could raise about US$2 billion, people familiar with the matter said, asking not to be named because the matter is private. “Chinese companies in the new economy do not seem to have been deterred from seeking US listings despite the ongoing tensions,” said Calvin Lai, a partner at Freshfields Bruckhaus Deringer. “They take that as one of the risks but that doesn’t tilt the pendulum.”
Additional share sales by Chinese companies have also been well-received in the US this year, delivering an average return of 11 percent from their offering prices in the following session, according to data compiled by Bloomberg. While rival financial centers like Hong Kong have in the past few years changed their listing rules to make it easier for new economy firms to go public there, that has not stopped the flow of firms going stateside.
The traffic now goes both ways, with US-traded Chinese firms getting a second listing in Hong Kong to expand their investor base and as a hedge against the delisting risk. Such secondary listings raised almost US$17 billion last year and have fetched more than US$8 billion this year already, Bloomberg data showed. Bankers said that many companies go to the US knowing they can subsequently list in Hong Kong.
For example, Didi is also exploring a potential dual offering in Hong Kong later, a person familiar with the matter has said, while Chinese electric vehicle maker Xpeng Inc (小鵬汽車) is also looking into a share sale in the financial hub less than a year after going public in New York. US capital markets have long attracted Chinese companies for a number of reasons: their greater liquidity, broader investor base and the cachet associated with a US listing.
Technology and fintech firms have flocked to the US because of its more streamlined process as well as greater openness to loss-making businesses. “The US still remains a magnet for the IPOs of Chinese technology companies,” Tang said. “Just in terms of the pipeline, I don’t see any pause to that. I think the pipeline is very strong.”
This news was originally published at Taipei Times.