HONG KONG. The best start to the year for listing Chinese companies on US stock exchanges is showing signs of stress.
Chinese companies raised $ 4.4 billion on the New York Stock Exchange and Nasdaq Stock Exchange through April 7, up from $ 807 million in the same period last year, according to data compiled by Dealogic.
However, 10 Chinese companies that debuted in New York since February 9 fell on the first day of trading. Q&A website Zhihu fell 11% when it debuted on March 27 after the $ 523 million bid price was the bottom of the market range.
By comparison, 17 Chinese companies, each of which raised at least $ 100 million in a US IPO last year, have added 28% since their debut, according to Dealogic.
“The combination of geopolitics, appraisal concerns and fears that there could be more episodes like Archegos Capital is hampering a good start to the year for stocks in general and for Chinese listing in the US,” said Terence Ng, co-founder of the investment firm. consulting firm IJK Capital Partners in Singapore, referring to the family office in the United States, which resulted in billions of dollars in losses for banks including Nomura and Credit Suisse last month as a result of the sale of its assets, including shares in Chinese internet companies Baidu and Tencent Holdings.
“The appetite for Chinese companies will continue as they promise continued growth. However, the number of deals in the short term depends on market sentiment, ”Ng said.
Lower investor demand could hurt the outlook for more than 10 companies, including Ant Group-backed bike rental service Hello and cargo company Full Truck Alliance, backed by SoftBank, which people familiar with the deals say are jointly aiming to raise more than $ 8 billion.
Powerbank rental company Smart Share Global, known as Energy Monster and backed by Alibaba Group Holding, Xiaomi smartphone maker and private equity firm Hillhouse Capital, was forced to halve its offer last week to $ 150 million after it valued it at $ 8. , $ 50 per share, well below the market range. On the first day of trading, it fell 5.3%.
“Investors are wary of stocks more broadly, and Chinese tech companies bear the brunt of the sell-off,” said a person who worked on some of the recent listings. “While interest in Chinese companies remains, given the growth prospects, investors are asking more questions. They seem to want companies to be very conservative about their proposals. “
Zhihu, which has Alibaba and Tencent as investors, priced its offer at $ 9.50 a share on March 26. Although the stock recovered from its first day plunge, it is still below the IPO price, closing at $ 8.96 on the NYSE on Thursday.
According to Dealogic, 36 Chinese companies raised $ 13.5 billion on US exchanges last year, the highest since a record $ 29.1 billion in 2014. The 2014 prosperity was the result of Alibaba’s $ 25 billion IPO on the NYSE.
Chinese companies continue to flock to the US to tap into their vast pool of investors and trust that Washington and Beijing will come to a compromise to prevent the expulsion of hundreds of Chinese companies.
Under a law passed last year by the US Congress, Chinese companies could face the risk of exiting US exchanges by 2023 if US regulators are not allowed to review their audit records. Beijing bans such checks for national security reasons. The US Securities and Exchange Commission last month took the first steps to enact the law.
As of October, 217 Chinese companies with a total market capitalization of $ 2.2 trillion were listed on US exchanges, according to the US-China Economic and Security Review Commission.
“Many of the advantages of the American market over the Chinese market are long-term and structural,” said Tianlei Huang, a fellow at the Peterson Institute for International Economics in Washington. “And in the calculations of those firms seeking US listings, such structural advantages may outweigh the problems posed by stricter audit rules and other uncertainties in the broader US-China relationship.”