If IPOs of Chinese unicorns grind to a halt, the Hong Kong exchange should still be boosted by secondary listings and the conversion of American depository receipts, according to Bloomberg Intelligence analyst Sharnie Wong. Hong Kong looks well placed to benefit from the geopolitical and regulatory frictions though dealmaking in the financial hub may also become entangled in the regulatory push.
The Cyberspace Administration of China said Saturday that its proposed review would address risks for data to be “affected, controlled, and maliciously exploited by foreign governments.” The China Securities Regulatory Commission is now leading efforts to revise overseas listings rules that would require VIE firms, which do business in China but are registered in places like the Cayman Islands, to seek approval before selling shares overseas, Bloomberg has reported. For two decades China’s technology giants have sidestepped restrictions, using the so-called Variable Interest Entity model to attract foreign capital and IPO offshore.
has shed some $145 billion in value.Īt the heart of the recent crackdown is how far regulators will go to check foreign investment in sensitive industries, particularly those controlling vast amounts of data. So far this month, the Nasdaq Golden Dragon Index - which tracks some of the biggest Chinese firms listed in the U.S. Valuations for China’s technology firms, which were already falling before the recent onslaught, now look shakier as investors signal they will demand steeper discounts to buy shares, said one banker, asking not the named discussing internal business. In all, China’s crackdown on overseas listing threatens about 70 other private firms based in Hong Kong and China that are set to go public in New York, according to data compiled by Bloomberg. Other deals that could be in doubt include Hong Kong delivery firm Lalamove’s potential $1 billion IPO. IPO is also in limbo, according to people with knowledge of the matter. public filing, the Financial Times reported.
IPO on Thursday.įitness app Keep has also opted not to go ahead with a planned U.S. One immediate victim was LinkDoc Technology Ltd., a Beijing-based medical data company, which halted preparations for a U.S. In the meantime, what had been a healthy IPO pipeline is weakening. has been very supportive of Chinese internet companies, the development of them, and the subsequent financing.” “Ultimately, China will find a solution because the U.S. “There are some uncertainties that might take one or two months to work its course,” David Chin, head of investment banking in Asia Pacific at UBS Group AG said of China’s changing rules at a briefing last week. Listing requirements in the financial hub and mainland China are also more stringent, making deals there far from certain. deals.īankers now say they expect the majority of Chinese IPOs aimed for American exchanges to be suspended or diverted to other venues, eating into projected revenue for the year given the significantly lower fees in Hong Kong. The moves imperil the frenetic dealmaking seen during the pandemic, and the lucrative business of offshore listings that’s pulled in some $6.4 billion in fees since 2014, when Alibaba Group Holding Ltd.’s began trading in New York. Simultaneously, President Xi Jinping stepped up oversight of big technology firms, partly to secure the treasure trove of data they control. In December, Donald Trump signed a bill that could delist Chinese companies that don’t meet audit inspection rules. As underwriters totted up a record $1.5 billion in fees last year from helping Chinese firms with initial public offerings offshore, relations between China and the U.S. The warning signs had been flashing for a while. On Saturday, a cybersecurity review was proposed for companies with data on more than 1 million users before they seek to list in foreign countries. trading debut, followed swiftly by the State Council announcing closer scrutiny of all offshore listings.
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Deals are being shelved and investors are nursing heavy losses.Ī chill has settled over global finance after a fortnight in which China first cracked down on its Uber-like Didi Global Inc. Just months after bankers celebrated a record haul from taking Chinese companies public in New York and Hong Kong, they’ve had a rude awakening. Wall Street’s $6 Billion Fee Bonanza Chilled By China IPO Curbs
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