A return to Wall Street

Attracting Chinese firms again

Ask someone if they’d like a pleasant surprise and the answer is generally going to be ‘yes’. This is one of the main reasons why ‘blind box’ promotions have become so popular in China in recent years.

It started off as a craze for collectible figurines. Younger consumers buy unlabelled packages and then discover what mystery toys are inside (see WiC468).

The trend has now spread to the travel industry too. While the rest of the world grapples with whether to issue Covid passports, Chinese consumers are falling over themselves to snap up promotions from the likes of Trip.com, Qunar and Fliggy. For the price of no more than Rmb99 ($15), they can buy a ‘blind box’ promotion for flights to different Chinese cities. They won’t know the date or the destination until they open the box. The price is a bargain – though there is no obligation on the consumer’s part to travel.

The boom in Chinese travel is driving capital markets activity as well. One hotel group, Atour, has decided to forgo a prospective A-share listing and opt for a speedier New York flotation instead.

It’s not the only one. Some 76 companies suspended their listing applications for Shanghai’s STAR board in the first quarter. Many are likely to try their luck in the US instead. What lies behind this trend? Not so long ago the media was talking about the reverse scenario as many longstanding New York-listed Chinese firms went private and then relisted in Hong Kong, Shanghai or Shenzhen. Alternately some stayed in New York, but hedged their geopolitical bets by securing a secondary listing elsewhere. Cases in point: the second and third biggest Hong Kong IPOs of the year so far were secondary offerings for Baidu ($3.03 billion) and Bilibili ($2.6 billion) – retaining their US tickers.

However, a large number of Chinese companies are still heading to American bourses, seemingly unperturbed by Sino-US tensions, or a delisting threat if they fail to meet a three-year deadline to comply with US audit inspections.

What they are interested in tapping are the bullish US equity markets. The Financial Times cited Dealogic data showing that Chinese groups had raised a record $11 billion in New York in the first four months, up 440% on the same period last year. The same data also shows that globally, companies raised $230 billion from IPOs during the first four months of the year. However, almost 50% of global listings have been the equity market equivalent of a ‘blind box’, known as a SPAC (special purpose acquisition vehicle).

Numerous stock market commentators and investors such as Jim Rogers have lined up to condemn SPACs as a sure sign of a bull market coming to an end.

In WiC532, we noted that Chinese companies were also starting to show an interest in the vehicles and so far this year there have been SPAC listings from China PE house Primavera Capital, HH&L (led by Goldman’s ex-Asian head and the ex-CIO of Great Wall Asset Management), Silvercrest (led by JPMorgan’s ex-Asian M&A head and Ascendant Capital’s Leon Meng) and Magnus Opus (Blackstone’s Frank Han and Point72’s Jonathan Lin). Together the four have raised $1.37 billion.

It’s an unusual situation when US equity markets are attracting monikers like “reckless” and “wild” while China’s markets are being described as conservative and dull. And that’s another reason why Chinese companies are heading across the Pacific.

As WiC has earlier reported Chinese regulators have been clamping down on IPO filings. The domestic media says that prospective STAR Board candidates are being grilled about every aspect of their businesses and founders have even been ordered to disclose all personal bank transactions above Rmb30,000 ($4,600).

As one netizen said of the greater oversight: “This seems like something that’s very necessary to do in order to develop confidence in the quality of the [STAR Board] listings and to avoid speculative bubbles and future catastrophic crashes.”

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