China overtakes the US in tech IPOs during third quarter

PwC cautions that the trend of smaller tech companies going public during the quarter may signal ‘low-value listings’ globally

PUBLISHED : Thursday, 17 November, 2016, 11:58pm
UPDATED : Thursday, 17 November, 2016, 11:59pm

China posted the highest number of technology initial public offerings (IPOs) during the third quarter of this year with nine companies raising funds to the tune of US$611 million, compared with just six during the same period in the United States, a PricewaterhouseCoopers report said.

According to the “PwC Global Technology IPO Review Q3 2016” there was a “burst in IPO momentum” in the third quarter following increased confidence in the country’s economy.

“Nevertheless, the absence of large floats in major markets is indicative of a technology IPO market that is open, though not necessarily strong. In this scenario, the rising number of IPOs has stemmed largely from growth of low-value listings over the third quarter,” said Wilson Chow, PwC’s leader for technology, media and telecommunications sector for China/Hong Kong.

On a global basis, 20 technology companies raised funds of US$5.38 billion during the third quarter, a 264 per cent increase from the previous quarter, PwC said.

The absence of large floats in major markets is indicative of a technology IPO market that is open, though not necessarily strong
PwC’s Wilson Chow

Europe recorded three technology IPOs during the period and was also home to the largest listing of the year to date, with Nordic payments company Nets rasing US$2.4 billion. The six technology IPOs in the US raised combined funds of about US$627 million, PwC said.

Software and internet software and services companies accounted for 65 per cent of the total technology IPOs during the third quarter and for 47 per cent of the proceeds, the report said.

The size of the IPOs in China had fallen during the third quarter of this year compared with the same period last year, when two companies raised US$1.467 billion.

PwC said 836 companies are waiting for listing approvals in Shanghai or Shenzhen.

PwC China TMT partner Frank Lin said the growing number of tech IPOs in China is a reflection of the pent up demand and not a sign of a revival of the Chinese capital market as regulators are still wary. Lin expects a return of cross-border floats.

“Cross-border IPOs, especially in Hong Kong and the US, are becoming appealing again for Chinese tech companies, and we anticipate they will continue to grow in prominence, at least in the short-term,” Lin said.

Messaging app Snapchat has filed for an IPO under the US Jumpstart Our Business Startups Act, Reuters reported. It is expected to be the largest stock market debut since Alibaba Group went public in 2014 and the largest technology IPO since Facebook made its debut with a value of US$81.2 billion in 2012.

The California-based Snapchat could go public as early as March and is valued at US$20 billion to US$25 billion. It would also be a bellwether for listings of other venture-backed companies valued at over US$1 billion such as Uber and Airbnb.

Alibaba owns the South China Morning Post.