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More Chinese firms look past Washington’s delisting threat to IPO in the US

Boss-w

A subway ad for Boss Zhipin

In an era increasingly defined by geopolitical tension and a push towards economic “decoupling” there is a paradox: never have there been more Chinese unicorns rushing to make an impression on Wall Street’s investors.

Chinese issuers on the Nasdaq and New York Stock Exchange (NYSE) have raised a total of $23.8 billion from 69 initial public offerings between March and June 15, the South China Morning Post reported, surpassing the $17 billion from 40 flotations for the full second quarter of 2020.

Even as Joe Biden has expanded Trump-era blacklists of Chinese companies and new US audit rules have increased the prospects of forced delistings, a raft of issuers from China have taken advantage of an American market awash with liquidity, thanks to the Federal Reserve’s monetary loosening (there’s a rush to IPO before the Fed hikes rates).

The lure of New York for certain types of Chinese companies compares favourably with their chances of listing at home too. A circular issued in April by the country’s most start-up-friendly bourse, the Shanghai STAR Market, made plain its focus was on admitting companies with proprietary technology, such as those in the fields of biomedicine and integrated circuits. That, in turn, has forced a lot of China’s lower-tech, platform-based internet firms to go public elsewhere.

A case in point is Kanzhun, the owner of China’s largest online recruitment platform Boss Zhipin. It last week raised $912 million on the Nasdaq in the largest Chinese IPO in the US since the offering of internet-of-things cloud company Tuya in March. The Tencent-backed Kanzhun saw its shares surge 96% upon its debut last Friday. That has supercharged its market value to nearly $15 billion, turning its 51 year-old founder Zhao Peng into a tycoon worth $2.6 billion.

Its triumph followed the 48% “pop” in share price by another debutant on the New York bourse the same week: Zhangmen Education, a Softbank-backed digital tutoring services provider. Such deals augur well for other companies readying to launch Wall Street IPOs in the coming weeks, most notably ride-hailing platform Didi Chuxing. With more than 493 million annual active users, the company could be valued at upwards of $70 billion, and raise 8-10% of that valuation, the Wall Street Journal reported.

Assuming Didi is not severely impacted by regulatory risks at home (see WiC540), its deal could displace the $4.6 billion offering of South Korean e-commerce company Coupang as the largest IPO for an international company in New York since Alibaba’s in 2014. Didi, founded by Alibaba alumnus Cheng Wei, is by far the single biggest investment of Japan’s SoftBank Vision Fund, which owns 21.5% of the Chinese unicorn.

Full Truck Alliance, an on-demand trucking platform known domestically as Manbang Group (it featured in our Top 50 China Unicorns Ranking; see our website), has also targeted to raise nearly $1.6 billion in a US listing. In its prospectus, the Guiyang-based company claimed that to be the world’s biggest digital freight platform by gross transaction value. Serving a fifth of China’s heavy-duty and medium-duty truckers and covering over 300 cities last year, it fulfilled 71.7 million orders worth Rmb173.8 billion ($19.28 billion). Backed by Softbank, Sequoia China and Tencent, it has yet to turn a profit, reporting a net loss of Rmb3.5 billion for 2020.

Also in the pipeline are online grocery platforms MissFresh and Dingdong Maicai, both of which are looking to raise $500 million.The brisk pace of listing activities could also resuscitate some delayed IPOs by other Chinese unicorns. These include Ximalaya, a Tencent-backed podcast and audio app operator; Hello, a bike-sharing firm affiliated with Ant Group; Qiniu, an Alibaba-backed cloud company; as well as For-U Worldwide, a Beijing-based digital freight transportation platform.


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