Connect with us

Finance

Chinese IPOs in the U.S., Hong Kong to rise next year, analysts say

Published

on

Chinese autonomous driving company WeRide listed on the Nasdaq on Friday, Oct. 25, 2024.

China News Service | China News Service | Getty Images

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.

How testing in the U.S. helped China develop its driverless cars

“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 some investments in consumer products such as milk tea and supermarkets, Lai said.

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Finance

Citadel’s Ken Griffin says Trump’s tariffs could lead to crony capitalism

Published

on

Ken Griffin, chief executive officer and founder of Citadel Advisors LLC, speaks during an Economic Club of New York event in New York, US, on Thursday, Nov. 21, 2024.

Yuki Iwamura | Bloomberg | Getty Images

Citadel CEO Ken Griffin issued a warning against the steep tariffs President-elect Donald Trump vowed to implement, saying crony capitalism could be a consequence.

“I am gravely concerned that the rise of tariffs puts us on a slippery slope towards crony capitalism,” the billionaire investor said Thursday at the Economic Club of New York.

The Citadel founder thinks domestic companies could enjoy a short-term benefit of having their competitors taken away. Longer term, however, it does more harm to corporate America and the economy as companies lose competitiveness and productivity.

Crony capitalism is an economic system marked by close, mutually advantageous relationships between business leaders and government officials.

“Those same companies that enjoy that momentary sugar rush of having their competitors removed from the battlefield, soon become complacent, soon take for granted their newfound economic superiority, and frankly, they become less competitive on both the world stage and less competitive at meeting the needs of the American consumer,” Griffin said at the event.

Trump made universal tariffs a core tenet of his economic campaign pitch, floating a 20% levy on all imports from all countries with a specifically harsh 60% rate for Chinese goods.

The protectionist trade policy could make production of goods more expensive and raise consumer prices, just as the world recovers from pandemic-era inflation spikes.

“Now you’re going to find the halls of Washington really filled with the special interest groups and the lobbyists as people look for continued higher and higher tariffs to keep away foreign competition, and to protect inefficient American businesses have failed to meet the needs of the American consumer,” Griffin said.

At the same event, Griffin also said that he’s not focused on taking Citadel Securities public in the foreseeable future. Citadel is a market maker founded by Griffin in 2002.

“We’re focused on building the business, on investing in our future. And we do believe that there are benefits to being private during this period of very, very rapid growth,” he said.

Continue Reading

Finance

Stocks making the biggest moves midday: NFLX, GOOGL, NVDA, BJ

Published

on

Continue Reading

Finance

CFPB expands oversight of Apple Pay, other digital payments services

Published

on

Rohit Chopra, director of the CFPB, testifies during the Senate Banking, Housing and Urban Affairs Committee hearing titled “The Consumer Financial Protection Bureau’s Semi-Annual Report to Congress,” in the Dirksen Building on Nov. 30, 2023.

Tom Williams | Cq-roll Call, Inc. | Getty Images

The Consumer Financial Protection Bureau on Thursday issued a finalized version of a rule saying it will soon supervise nonbank firms that offer financial services likes payments and wallet apps.

Tech giants and payments firms that handle at least 50 million transactions annually will fall under the review, which is meant to ensure the newer entrants adhere to the laws that banks and credit unions abide by, the CFPB said in a release. That would include popular services from Apple and Google, as well as payment firms like PayPal and Block.  

While the CFPB already had some authority over digital payment companies because of its oversight of electronic fund transfers, the new rule allows it to treat tech companies more like banks. It makes the firms subject to “proactive examinations” to ensure legal compliance, enabling it to demand records and interview employees.

“Digital payments have gone from novelty to necessity and our oversight must reflect this reality,” said CFPB Director Rohit Chopra. “The rule will help to protect consumer privacy, guard against fraud, and prevent illegal account closures.”

A year ago, the CFPB said it wanted to extend its oversight to tech and fintech companies that offer financial services but that have sidestepped more scrutiny by partnering with banks. Americans are increasingly using payment apps as de facto bank accounts, storing cash and making everyday purchases through their mobile phones.

The most popular apps covered by the rule collectively process more than 13 billion consumer payments a year, and have gained “particularly strong adoption” among low- and middle-income users, the CFPB said on Thursday.

“What began as a convenient alternative to cash has evolved into a critical financial tool, processing over a trillion dollars in payments between consumers and their friends, families, and businesses,” the regulator said.

The initial proposal would’ve subjected companies that process at least 5 million transactions annually to some of the same examinations that the CFPB conducts on banks and credit unions. That threshold got raised to 50 million transactions in the final rule, the agency said Thursday.

Payment apps that only work at a particular retailer, like Starbucks, are excluded from the rule.

The new CFPB rule is one of the rare instances where the U.S. banking industry publicly supported the regulator’s actions; banks have long felt that tech firms making inroads in financial services ought to be more scrutinized.

The CFPB said the rule will take effect 30 days after its publication in the Federal Register.

Continue Reading

Trending