Chinese autonomous driving company WeRide listed on the Nasdaq on Friday, Oct. 25, 2024.
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BEIJING — Chinese IPOs in the U.S. and Hong Kong are set to increase next year, analysts said, as some high-profile listings outside the mainland this year raise investor optimism over profitable exits.
Chinese autonomous driving company WeRide listed on the Nasdaq Friday with shares rising nearly 6.8%. Earlier this month, Chinese robotaxi operator Pony.ai also filed paperwork to list on the Nasdaq. Both companies have long aimed to go public.
Few large China-based companies have listed in New York since the Didi IPO in the summer of 2021 increased scrutiny by U.S. and Chinese regulators on such listings. The Chinese ride-hailing company was forced to temporarily suspend new user registrations, and got delisted in less than a year.
U.S. and Chinese authorities have since clarified the process for a China-based company to go public in New York. But geopolitics and market changes have substantially reduced U.S. IPOs of Chinese businesses.
“After a couple of slow years, we generally expect the IPO market to revive in 2025, bolstered by interest rate decreases and (to some extent) the conclusion of the U.S. presidential election,” Marcia Ellis, Hong Kong-based global co-chair of private equity practice, Morrison Foerster, said in an email.
“While there is a market perception of regulatory issues between the U.S. and China as being problematic, many of the issues driving this perception have been solved,” she said.
“Chinese companies are becoming increasingly interested in getting listed in Hong Kong or New York, due to difficulty in getting listed in Mainland China and pressure from shareholders to quickly achieve an exit.”
This year, as many as 42 companies have gone public on the Hong Kong Stock Exchange, and there were 96 IPO applications pending listing or under processing as of Sept. 30, according to the exchange’s website.
Last week, Horizon Robotics — a Chinese artificial intelligence and auto chip developer — and state-owned bottled water company CR Beverage went public in Hong Kong.
The two were the exchange’s largest IPOs of the year, excluding listings of companies that also trade in the mainland, according to Renaissance Capital, which tracks global IPOs. The firm noted that Chinese delivery giant SF Express is planning for a Hong Kong IPO next month, while Chinese automaker Chery aims for one next year.
Still, the overall pace of Hong Kong IPOs this year is slightly slower than expected, George Chan, global IPO leader at EY, told CNBC in an interview earlier this month.
He said the fourth quarter is generally not a good period for listings and expects most companies to wait until at least February. In his conversations with early stage investors, “they are very optimistic about next year” and are preparing companies for IPOs, Chan said.
The planned listings are generally life sciences, tech or consumer companies, he said.
Hong Kong, then New York
Investor sentiment on Chinese stocks has improved over the last few weeks thanks to high-level stimulus announcements. Lower interest rates also make stocks more attractive than bonds. The Hang Seng Index has surged over 20% so far this year after four straight years of declines.
Many Chinese companies that list in Hong Kong also see it as a way to test investors’ appetite for an IPO in another country, said Reuben Lai, vice president, private capital, Greater China at Preqin.
“Geopolitical tensions make Hong Kong a preferred market,” Ellis said, “but the depth and breadth of US capital markets still make many companies seriously consider New York, especially for those that focus on advanced technology and are not yet profitable, who sometimes believe that their equity stories will be better received by U.S. investors.”
Just over half of IPOs on U.S. exchanges since 2023 have come from foreign-based companies, a 20-year high, according to EY.
Geely-backed Chinese electric car company Zeekr and Chinese-owned Amer Sports both listed in the U.S. earlier this year, according to EY’s list of major cross-border IPOs.
Chinese electric truck manufacturer Windrose said it intends to list in the U.S. in the first half of 2025, with a dual listing in Europe later that year. The company, which aims to deliver 10,000 trucks by 2027, on Sunday announced it moved its global headquarters to Belgium.
A recovery in Chinese IPOs in the U.S. and Hong Kong can help funds cash out on their early stage investments in startups. The lack of IPOs had reduced the incentive for funds to back startups.
Now, investors are looking at China again, after recently deploying capital to India and the Middle East, Preqin’s Lai said. “I’m definitely seeing a greater potential from now in China whether it’s money coming back, valuation of the companies, exit environment [or] performance of the funds.”
While the pickup in investor activity is far from levels seen in the last two years, the nascent recovery includes someinvestments in consumer products such as milk tea and supermarkets, Lai said.
Check out the companies making headlines in midday trading. Dutch Bros — The stock popped more than 32% following the coffee chain’s better-than-expected third-quarter results. Dutch Bros earned 16 cents per share on revenue of $338 million for the period, while analysts surveyed by LSEG had penciled in 12 cents per share and $325 million in revenue. Trump Media & Technology Group — Shares of President-elect Donald Trump’s media company plunged more than 20%, giving back the gains in the previous session triggered by his election victory. The stock had popped 5.9% on Wednesday after the Republican was elected the 47th president of the United States. Warner Bros. Discovery — Shares of the streaming platform jumped 9.9% after Warner Bros. Discovery reported third-quarter earnings that reflected its biggest quarterly subscription growth since inception. Warner Bros. Discovery added 7.2 million global subscribers during the quarterly period and had 110.5 million subscribers as of Sept. 30. Under Armour — The athletic clothing company’s stock rallied 33% on stronger-than-expected fiscal second-quarter results. Under Armour posted adjusted earnings per share of 30 cents on revenue of $1.40 billion, while analysts polled by LSEG expected a profit of 20 cents per share and revenue of $1.39 billion. Lyft — Shares rallied 24% after the rideshare company posted a fourth-quarter outlook that beat analysts expectations. Lyft expects current-quarter bookings to come in between $4.28 billion to $4.35 billion, topping a FactSet consensus of $4.23 billion. Lyft also reported a third-quarter adjusted EBITDA and revenue beat. Wolfspeed — The semiconductor manufacturer plunged 34% after fiscal first-quarter revenue and current-quarter guidance came in weaker than expected. Wolfspeed posted revenue of $195 million for the first fiscal quarter, missing the LSEG consensus forecast by $5 million. The company said to expect between $160 million and $200 million in revenue during the current quarter, less than the $215 million figure penciled in. Match Group — Shares of the dating platform fell 17% on mixed third-quarter results and a disappointing fourth-quarter revenue outlook. The company called for a range of $865 million to $875 million in revenue for the fourth quarter, coming out below the forecast $905.1 million from analysts polled by FactSet. Arm Holdings — The semiconductor company gained 5.5% after its quarter results beat estimates. Arm posted adjusted earnings per share of 30 cents on revenue of $844 million for the second quarter. Analysts polled by LSEG forecast a profit of 26 cents per share and revenue of $808 million. Take-Two Interactive Software — The video game maker advanced 6% after posting a top-line beat in the fiscal second-quarter. Take-Two reported $1.47 billion in revenue, topping the expectation of $1.43 billion from analysts surveyed by LSEG. HubSpot — Shares rose 10% after the customer platform company’s quarterly earnings of $2.18 per share on revenue of $669.7 million surpassed expectations. Analysts polled by FactSet estimated earnings of $1.91 per share on $647 million in revenue. AppLovin — The software publisher’s stock price skyrocketed 44% after its third-quarter results beat analysts’ expectations. AppLovin also guided its fourth-quarter EBITDA of $740 million higher to $760 million, higher than the $667 million StreetAccount forecast. Zillow Group — The housing market site saw its shares jump 24%, driven by higher-than-expected earnings and revenue results from the third quarter. Zillow posted adjusted earnings per share of 35 cents on revenue of $581 million. Analysts surveyed by LSEG forecast 29 cents in earnings per share and $555 million in revenue. e.l.f. Beauty — Shares of the beauty products retailer popped 18% after e.l.f. Beauty lifted its full-year earnings and revenue outlook. The company forecasted earnings in the range of $3.47 to $3.53 per share, higher than prior guidance of $3.36 to $3.41 per share. Its revenue is now in the range of $1.31 billion to $1.33 billion, up from a forecast of $1.28 billion to $1.30 billion. Gilead Sciences — Shares of gained 5.9% after the biotech company issued better-than-expected full-year earnings guidance. The company now sees earnings per share in the range of $4.25 to $4.45. Analysts polled by LSEG called for $3.80 per share. — CNBC’s Alex Harring, Sean Conlon, Hakyung Kim, Yun Li and Lisa Kailai Han contributed reporting.
Attendees cheer as a broadcast of former US President and Republican presidential candidate Donald Trum speaking at his Florida election party is shown on a screen at the Nevada GOP election watch party in Las Vegas, Nevada on November 6, 2024.
Ronda Churchill | Afp | Getty Images
Wall Street dealmakers and corporate leaders expect the flood gates to open on merger and acquisition activity after President-elect Donald Trump takes office in January.
And he’ll likely have congressional help. Trump defeated Democratic candidate Vice President Kamala Harris, and Republicans claimed a majority of the Senate in elections this week. That red wave is expected to spell loosening regulations on deal-making, with plenty of pent-up demand.
“We know kind of where the world is headed in a Trump environment because we’ve seen it before,” said Jeffrey Solomon, president of TD Cowen, on CNBC’s “Money Movers” Wednesday. “I think the regulatory environment will be much more conducive to economic growth. There will be lighter and targeted regulation.”
Solomon added that the scaled-back regulation will be focused on certain areas “of particular interest to the Trump administration,” rather than a broad based reassessment of the entire landscape.
In recent years, there has been greater scrutiny of pending deals by the Biden administration’s Department of Justice and Federal Trade Commission, headed by Chair Lina Khan. Some have pointed to that dynamic as a chilling factor on deal flow. High interest rates and soaring company valuations have contributed, too.
Khan said in September that “when you see greater scrutiny of mergers, you can see greater deterrence of illegal mergers.” Her hard line has drawn harsh criticism, but now, there’s optimism around a forthcoming FTC with a lighter hand.
“Assuming interest rates drop and you see corporate tax rates go down, the ingredients are there for a really active M&A market,” said one top dealmaker, who talked to CNBC on the condition of anonymity to speak candidly.
Some sectors, including financial and pharmaceutical industries in particular, are likely to get a lift under a second Trump regime, experts said.
“We could see domestic manufacturing benefit from increased tariffs as well as a growth in technology, which slowed down from a tighter antitrust environment,” said Howard Gutman, private equity strategy and coverage lead for MorganFranklin Consulting. “Additionally, we expect the aerospace and defense industry to grow as it has historically done during past Republican administrations paired with the broader geopolitical environment.”
Other industries, such as tech, may still face an uphill battle in getting deals done.
One M&A advisor, who also spoke to CNBC anonymously, noted that Trump’s disdain for Big Tech companies — historically active deal-makers — might keep them on the sidelines. On Wednesday, tech leaders took to social media to congratulate Trump.
Apparent GOP opposition to the CHIPS Act means that semiconductor consolidation might be challenging, the advisor noted, while cautioning it is still too early to know what a Trump presidency would mean. CNBC previously reported that Qualcomm recently approached Intel about a potential takeover.
“I think the simplest way to put it is more deals, less regulation with the administration having its thumb on the scale, perhaps with a willingness to pick winners and losers,” said Jonathan Miller, chief executive of Integrated Media, which specializes in digital media investments.
Regional banks, many of which recognize the need for scale, will also likely look to consolidate, said one former industry executive. That advisor noted that smaller banks had been getting gobbled up for “some time,” but that the pace and size of those acquisitions would likely ramp up under a Trump presidency.
Pharmaceutical executives are also optimistic that lighter antitrust enforcement could clear the way for deal-making, said one health-care-focused M&A advisor, who added that antitrust enforcement could have “hardly gotten worse” under either administration but now believes things will improve “meaningfully.”
Khan has taken on scores of biopharma mergers over the last four years, arguing that monopolies will stifle the development of new drugs in certain disease areas and hurt consumer choice. Biotech company Illumina last year said it would divest diagnostic test maker Grail after heated battles with the FTC and European antitrust regulators.
Also last year, the FTC blocked Sanofi’s proposed acquisition of a drug in development for Pompe disease, a genetic condition, from Maze Therapeutics. Sanofi ultimately terminated that deal.
“Whether or not Lina Khan is bounced day one is a key consideration, but even if fewer changes at the FTC take place, there is no doubt this administration — at least on paper — will be far more amicable when it comes to business combinations,” Jared Holz, Mizuho health-care equity strategist, said in an email on Wednesday.
One top dealmaker expected an M&A uptick broadly, but agreed that the financial sector and pharmaceuticals were particularly poised for a resurgence. That deal-maker also noted that with the Senate flipping, more outspoken antitrust voices like Sen. Elizabeth Warren, D-Mass., could find it more difficult to push for DOJ or FTC investigations.
Eyes on retail, media
David Zaslav at the Allen & Company Sun Valley Conference on July 9, 2024 in Sun Valley, Idaho.
David Grogan | CNBC
A Trump presidency could usher in a number of retail deals that have been hamstrung by the FTC. Kroger’sbid to take over grocery chain Albertsons could have a better chance of getting approved under Trump, as could Tapestry’s proposed acquisition of Capri.
The merger between Kroger and Albertsons is currently under review by a federal judge, while Tapestry is working to appeal a federal order that granted the FTC’s motion for a preliminary injunction against the tie-up.
“The hostile approach of the FTC to mergers and acquisitions will almost certainly be reset and replaced with a worldview that is more favorable to corporate dealmaking,” said GlobalData managing director Neil Saunders. “This does not necessarily mean that big deals like Kroger-Albertsons will be waved through, but it does mean others like Tapestry-Capri will receive a far warmer reception than they have under the Biden administration.”
Meanwhile, ongoing turmoil in the media industry has led many to consider consolidation as the next step for the sector.
Warner Bros. Discovery CEO David Zaslav on Thursday highlighted opportunities that could come up if regulations were to loosen, doubling down on comments he made earlier this year at Allen & Co.’s annual Sun Valley conference.
“We have an upcoming new administration. … It’s too early to tell, but it may offer a pace of change and opportunity for consolidation that may be quite different, that would provide a real positive and accelerated impact on this industry that’s needed,” Zaslav said on an earnings call.
Broadcast station group owner Sinclair on Wednesday echoed a similar sentiment.
“We’re very excited about the upcoming regulatory environment,” CEO Chris Ripley said during an earnings call. “It does feel like a cloud over the industry is lifting here.”
Still, the track record between the previous Trump administration and the Biden administration for media industry deals is split.
Trump’s DOJ allowed Disney to buy Fox’s assets, but then sued to block AT&T’s deal for Time Warner.
Under the Biden administration, Amazon’s $8.5 billion deal for MGM and the merger of Warner Bros. and Discovery Communications were both waved through, but a federal judge blocked the $2.2 billion sale of Simon & Schuster to Penguin Random House.
Skydance Media and Paramount Global agreed to merge earlier this year and expect to receive regulatory approval in 2025.
Check out the companies making headlines in premarket trading. Lyft — The rideshare stock advanced more than 23% after a stronger-than-expected fourth-quarter outlook. Lyft expects bookings in the current quarter of $4.28 billion to $4.35 billion, while analysts polled by FactSet expected $4.23 billion. Arm Holdings — Shares of the semiconductor company slipped about 7% despite second-quarter results surpassing Wall Street estimates. Arm reported adjusted earnings per share of 30 cents on revenue of $844 million, while analysts polled by LSEG forecast a profit of 26 cents per share and revenue of $808 million. Wolfspeed — Stock in the semiconductor manufacturer plummeted more than 25% after a revenue miss and a lower-than-expected outlook. Wolfspeed forecasts fiscal second-quarter revenue in the range of $160 million to $200 million, while analysts surveyed by LSEG were looking for $215 million. Take-Two Interactive Sotftware — Shares of the video game designer gained more than 4% after its second-quarter revenue of $1.47 billion surpassed an expected $1.43 billion from analysts polled by LSEG. HubSpot — Shares gained about 7% in premarket trading. The customer platform company’s third-quarter results of $2.18 per share on revenue of $669.7 million beat the forecasted earnings of $1.91 per share on $647 million in revenue from analysts surveyed by FactSet. SolarEdge — The solar panel inverter stock slipped more than 16% after a third-quarter revenue miss. SolarEdge reported revenue of $261 million, while analysts surveyed by LSEG were looking for $269 million. Dutch Bros — Stock in the coffee franchise added 18% on the heels of better-than-expected third-quarter results. The company posted adjusted earnings per share of 16 cents and $338 million in revenue, while analysts polled by LSEG forecast earnings of 12 cents per share and revenue of $325 million. Bumble — Shares of the online dating company were down nearly 6% after posting a loss of $5.11 per share, due to an impairment charge. Third-quarter revenue surpassed Wall Street estimates, and the company expects fourth-quarter revenue of $256 million to $262 million, compared with an estimate of $260 million. Duolingo — The learning app company’s shares fell 5% despite posting a top- and bottom-line beat in the third quarter. However, the number of paid subscribers — 8.6 million — came in slightly below the consensus estimate for 8.66 million, per StreetAccount. AppLovin — Shares surged 32% after the software publisher’s third-quarter results surpassed analysts’ expectations. AppLovin expects adjusted EBITDA of $740 million to $760 million in the fourth quarter, which is higher than the $667 million StreetAccount forecast. Match Group — Shares pulled back about 14% after posting mixed third-quarter results. The dating platform company’s fourth-quarter revenue outlook called for a range of $865 million to $875 million, below the forecast $905.1 million from analysts polled by FactSet. Qualcomm — The chipmaker rallied 5% before the bell on strong earnings and guidance . The company also said its board approved $15 billion in additional share repurchases. E.l.f. Beauty — Stock in the cosmetics company gained more than 7% after it raised its full-year earnings and revenue outlook. The firm now forecasts earnings in the range of $3.47 to $3.53 per share, compared with prior guidance of $3.36 to $3.41 per share. E.l.f. Beauty expects revenue in the range of $1.31 billion to $1.33 billion, up from a forecast of $1.28 billion to $1.30 billion. Zillow — Stock in the housing market site advanced more than 13% after beating Wall Street estimates on the top and bottom line in the third quarter. Zillow reported adjusted earnings per share of 35 cents on revenue of $581 million, while analysts polled by LSEG forecast 29 cents per share and $555 million, respectively. Gilead Sciences — Shares of the biopharmaceutical company added about 2% after surpassing Wall Street esitmates for its full-year earnings guidance. Gilead now forecasts earnings per share in the range of $4.25 to $4.45 per share, while analysts polled by LSEG were looking for $3.80. Moderna — Shares rallied 7% after Moderna’s third-quarter earnings and revenue topped expectations. Earnings of 3 cents per share was greater than the expected loss of $1.90 per share loss, per LSEG. Revenue of $1.86 billion surpassed the expected $1.25 billion. Under Armour — Shares gained 25% after stronger-than-expected second-quarter results. The athletic clothing company reported adjusted earnings per share of 30 cents on revenue of $1.40 billion while analysts polled by LSEG called for a profit of 20 cents per share and revenue of $1.39 billion. Hershey — Shares slipped more than 3% after weaker-than-expected third-quarter results. Hershey earned $2.34 per share after adjustments on revenue of $2.99 billion, while analysts surveyed by LSEG expected it to earn $2.56 per share on $3.08 billion in revenue. — CNBC’s Samantha Subin, Hakyung Kim and Sarah Min contributed reporting