China Inc. Set for Biggest U.S. IPO Year Since 2014 Despite Spat
(Bloomberg) - Chinese companies choose to make their US market debut, even as Beijing and Washington get a handle on everything from trade and coronavirus to audit access.
Companies based in China raised $ 9.1 billion from initial public offerings in the United States this year, according to Bloomberg, bringing 2020 to its highest level since 2014. The list continues to grow: The Chinese budget consumer goods retailer Miniso Group Holding Ltd. . launched its US initial public offering that could raise up to $ 562 million, while Lufax Holding Ltd., a Chinese fintech company, applied for a US listing on Thursday that could potentially raise at least $ 3 billion.
"The US continues to be an attractive place for Chinese companies," said Tucker Highfield, co-head of equity markets for the Asia-Pacific region at Bank of America Corp., in a telephone interview. The US still offers Chinese companies more flexibility, deeper liquidity and a much more time-efficient process for applying for listings.
The increase was due to the fact that tensions have sprung up between the world's two largest economies this year, across everything from trade to markets. President Donald Trump said in May that he "looked at" Chinese companies that do not comply with US accounting rules. In August, US regulators threatened to ban Chinese companies from listing in the US, citing Beijing's refusal to allow company audit inspections.
For some, the threat of future delisting hasn't deterred them. Online real estate platform KE Holdings Inc. raised $ 2.4 billion in a Chinese company's largest US IPO this year in July, followed by electric car maker XPeng Inc.'s $ 1.7 billion bid two weeks later .
Yet the US only gets a fraction of the business. China and Hong Kong raised 86% of the $ 94.7 billion Chinese companies raised through initial offers globally this year, data from Bloomberg shows. Ant Group Co.'s upcoming Hong Kong and Shanghai simultaneous listings could raise as much as $ 35 billion.
One reason Chinese companies choose to go public in the US rather than being closer to their home country is because, unlike its local markets, the US gives companies the option to list, even if they are not yet profitable. In Hong Kong, only biotech companies and companies with two-class share structures are exempt from the requirement. Miniso reported a loss of $ 37 million for the first half of 2020. XPeng was also loss making when it debuted in the US.
Read more: The US IPO of China Fintech Lufax is exposed to regulatory risks: ECM Watch
"Most of these pre-for-profit companies will have a hard time raising funds in Hong Kong," said Steven Leung, Hong Kong executive director of UOB Kay Hian. "Chinese companies prefer US listing over the Shanghai STAR board of directors as fundraising is in foreign currency rather than renminbi, which could aid their overseas expansion and are less subject to capital controls."
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