Dong Shaopeng: Chinese firms eye home IPOs as US listings lose luster amid regulatory clashes


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Dong Shaopeng: Chinese firms eye home IPOs as US listings lose luster amid regulatory clashes


Source: Global Times    Published: 2021-07-14

With overseas listings by Chinese companies coming under closer domestic scrutiny amid the regulator's push for stronger data protection, local businesses that want to raise funds are focusing on the home capital market rather than US IPOs, market watchers said.

Hong Kong-based on-demand logistics start-up Lalamove, which reportedly filed for a US IPO last month, may shift the planned listing to the Hong Kong market, media reports said.

The reported shift comes in the wake of a draft guideline by the Cyberspace Administration of China (CAC) over the weekend that requires internet platform companies with more than 1 million end users file for cybersecurity reviews before applying for overseas IPOs.

The draft regulation, which is open for public comment through July 25, is intended to put in place a firewall for planned overseas floats by Chinese platform companies.

Consequently, Keep, a Chinese fitness app backed by SoftBank and Tencent, has suspended its plan to file an IPO in the US, media reports said. The IPO was expected to raise up to $500 million, but it did not go ahead as planned last week.

Ximalaya, a Chinese podcast platform, has also dropped its plan to be listed in the US and has pivoted toward a Hong Kong IPO, according to Reuters. The podcast operator is also Tencent-backed, and it had filed to go public in New York in May.

Tightening regulations from both the Chinese and US sides may discourage even more companies from seeking an IPO in the US, Dong Dengxin, director of the Finance and Securities Institute of Wuhan University, told the Global Times on Wednesday.

"Chinese authorities are now more wary of the risks concerning data security, while the US is pushing for tougher regulations that are considered openly discriminatory to Chinese companies," Dong said.

Chinese ride-hailing giant Didi was slapped with a cybersecurity review earlier this month, shortly after its hasty listing on the New York Stock Exchange.

Several class-action suits have been prepared or filed on behalf of investors against Didi, seeking to recoup damages.

Three additional internet platforms, job recruiting platform Boss Zhipin, and Yunmanman and Huochebang - two truck-booking platforms under the Full Truck Alliance, were also put under cybersecurity scrutiny, on heels of the probe into Didi.

Kanzhun, owner of Boss Zhipin, and Full Truck Alliance, both debuted in the US market in June.

The US government has been piling up pressure on US-traded Chinese companies to share audit working papers, threatening them with delistings from US exchanges in cases they haven't complied for three consecutive years.

The US rule is apparently at odds with China's tightened regulation on cybersecurity breaches, analysts noted.

The possible intimidation of US-listed Chinese firms regarding data transfers could be one of the biggest risks for the likes of Didi, Dong Shaopeng, a senior research fellow at the Chongyang Institute for Financial Studies at Renmin University of China, told the Global Times in an earlier interview.

The uncertainties will deter more companies from seeking an IPO in the US, Dong said, adding that the appeal of the US's increasingly politicized market has been obscured by the markets in Hong Kong and Shanghai.

"As China ramps up efforts to protect data and information security, internet companies will find it increasingly hard to seek IPOs in the US," Dong said.

The shifting trend is seen as auguring well for the home markets, the Hong Kong bourse in particular.

In the first half of the year, 47 new listings landed on the Hong Kong stock exchange, with total funds raised hitting HK$212.96 billion ($27.42 billion), double the total for the same period last year, according to a statement PricewaterhouseCoopers (PwC) sent to the Global Times on Wednesday.

"We have observed that the new-economy and US-listed Chinese enterprises remain the main drivers for listing activities, successfully diversifying Hong Kong's capital market and laying an important foundation for the future development of Hong Kong IPO market," Eddie Wong, PwC Hong Kong capital markets services partner, said in the statement.

The annual funds raised in the Hong Kong market are forecast to reach a record high of HK$500 billion, per PwC.

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