Chinese IPOs in US expected to soar in 2018 despite Beijing regulatory pressure

Data centres, streaming businesses, education and life science among sectors boosting early 2018 pipeline

PUBLISHED : Friday, 02 February, 2018, 1:41am
UPDATED : Friday, 02 February, 2018, 11:04am

More Chinese companies are expected to go public in the US in 2018, despite a recent lull in the online lending sector amid regulatory pressure from Beijing.

“We foresee the number of China listings to be materially higher in 2018, with a 25 to 30 per cent jump from 2017,” Bob McCooey, senior vice-president of Nasdaq’s Listing Services unit, told the South China Morning Post.

The expected surge in Chinese initial public offerings in the US picks up from last year, when the number doubled from 2016.

Seventeen Chinese companies held IPOs on Nasdaq in 2017, up from seven in 2016, according to data provided by the US exchange. Thirteen are on file to be listed.

In total, about 110 companies are listed on Nasdaq from China, including e-commerce giant Alibaba Group Holdings Limited and online shopping centre Inc.

Alibaba owns the South China Morning Post.

With the exception of 2012, China, Asia’s largest economy, has been the top lister of IPOs among all non-US companies in every year since 2007.

And the appetite for US IPOs has continued to grow over the last decade as the country’s budding tech sector has matured.

Sectors that prop up a strong early 2018 pipeline include data centres, streaming businesses, education, life science, wearables and enterprise technology providers, McCooey said.

One very large Chinese company, expected to raise billions of US dollars in an IPO, is expected to go public in the first quarter, McCooey said, declining to disclose the enterprise’s name.

Hong Kong set to lose global IPO crown to New York and Shanghai as fundraising halves

Among companies possibly eyeing an IPO this year, according to recent news reports, are two Chinese tech unicorns, or start-ups valued above US$1 billion: ride-sharing service provider Didi Chuxing and e-commerce website Meituan-Dianping.

“We don’t try to convince people to list outside their countries because most businesses belong locally,” McCooey said. “But companies that have a global ambition and offshore businesses are our obvious clients.”

Recent tension between the US and China can spook investors and dampen the demand for Chinese IPOs. Nevertheless, the US remains the most liquid market for Chinese companies seeking growth capital.

Many Chinese companies have experienced dramatic growth on the US market.

The market capitalisation of Weibo, a microblogging service owned by Sina, for example, has increased to close to US$29 billion (HK$226.82 billion) from US$4 billion (HK$31.3 billion) at its 2014 IPO. 

Weibo’s stock jumped 19 per cent in its first day of trading in April 2014.

Not all companies have seen such gains. 

Chinese companies specialising in offering consumer loans have come under pressure since late last year as the Chinese government took steps to rein in the fast-growing and lightly regulated market by restricting the number of new approvals it issued for such lenders.

Shares tumbled in some Chinese financial technology companies as a result, leading to a pause in new listings in the sector.

Why Chinese companies are flocking to the US for a listing

As China moves from a saver’s generation to a spender’s generation, the need for the lending market is here to stay
Bob McCooey, Nasdaq

For example, Chinese online lender Qudian Inc lost two-thirds of its value in seven weeks, falling to US$11.49 in December. Fintech company’s stock has dropped 25 per cent over the past two months to trade at about US$11.50 this week.

“Chinese fintech was hot, then it was not,” McCooey said. 

“Regulatory changes are always the risk about investing in Chinese companies. But as China moves from a saver’s generation to a spender’s generation, the need for the lending market is here to stay,” he said.

For 2018, McCooey said he saw China as a country with more opportunities than challenges.

“The country has great tech companies and a strong entrepreneurial culture,” he said. The companies’ founders “will be recognised globally when they are listed here”.