Chinese lifestyle platform Xiaohongshu, known as ‘Little Red Book’, puts its US IPO on hold amid Beijing’s crackdown

Xiaohongshu among dozens of Chinese firms re-evaluating their IPO plans as China puts overseas listings under greater scrutiny
Social media and e-commerce platform topped 100 million monthly active users in 2019

Banking & finance

Chad BrayandGeorgina Lee

Published: 6:30pm, 16 Jul 2021

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Chinese social media and lifestyle platform Xiaohongshu has put its planned initial public offering in the United States on hold after Beijing announced plans to increase its scrutiny of foreign listings by the country’s high-flying technology sector, according to people familiar with the matter.

The company, also know as “Little Red Book”, is evaluating its next steps after the Cyberspace Administration of China (CAC) said it would review all foreign IPOs by technology platforms in China that possess the personal data of at least 1 million users, said the people, who were not authorised to discuss the matter publicly.

Xiaohongshu filed confidentially to list in the US earlier this year and was hoping to raise more than US$500 million.

Bloomberg reported the delay in Xiaohongshu’s IPO plans earlier on Friday.

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A Xiaohongshu representative did not immediately respond to a request for comment on Friday.

Backed by Tencent and Alibaba Group Holding, Xiaohongshu was founded in Shanghai in 2013 and has expanded to include social media and e-commerce. As of October 2019, the company had more than 100 million monthly active users, with 70 per cent of them born in the 1990s or later, according to its website. Alibaba is the parent company of the South China Morning Post.

It is among dozens of Chinese companies evaluating whether to proceed with plans to list in the US after China announced a series of data-security reviews and other crackdowns on the tech sector following ride-hailing giant Didi Chuxing’s US$4.4 billion IPO in New York in June.

Didi was the biggest offering in the US by a Chinese firm since 2014 and came after the company pushed forward with its IPO despite a request by Chinese regulators to delay its listing, prompting a deeper review by the authorities.

The regulatory crackdown goes back to the last-minute shelving of Ant Group’s dual listings in Hong Kong and Shanghai in November and has spooked investors on both sides of the Pacific.

Concerns about regulatory risk in China have wiped off about US$1 trillion in market value from US-listed Chinese tech stocks since mid-February, according to Goldman Sachs.

Apart from Xiaohongshu, a slew of other Chinese companies have also put their IPO-related activities on hold because of concerns that the Didi Chuxing debacle could potentially impact their valuations. E-commerce platform Meicai, medical data solutions provider LinkDoc Technology and fitness app Keep are among the companies that have shelved their IPO plans.

A number of Chinese and Hong Kong companies, including Hong Kong logistics start-up Lalamove, are considering potentially pursuing listings in Hong Kong rather than the US because of the fallout.

But it has not stopped all firms from proceeding with potential listings.

This week Jianzhi Education Technology Group became the first Chinese company to apply for a US IPO since Beijing announced the new rules. It was the Beijing online vocational education company’s fifth attempt at an offshore listing after four previous tries in Hong Kong failed.

This article appeared in the South China Morning Post print edition as: Lifestyle platform puts US listing plans on hold