China Inc set for biggest US IPO year since 2014 amid spat

LONDON (BLOOMBERG) – Chinese companies are choosing to make their market debuts in the US, even as Beijing and Washington spar over everything from trade and coronavirus to audit access.

Firms based in China have raised US$9.1 billion (S$12.3 billion) through US initial public offerings this year, according to data compiled by Bloomberg, putting 2020 on course for the highest annual total since 2014. The list is still growing: Chinese budget consumer goods retailer Miniso Group Holding has started its US IPO that could raise as much as US$562 million, while Lufax Holding, a Chinese fintech firm, filed this week for a US listing that could potentially raise at least US$3 billion.

“The US remains an attractive venue for Chinese companies to list,” said Tucker Highfield, co-head of equity capital markets for the Asia-Pacific at Bank of America. The US still offers Chinese firms greater flexibility, deeper liquidity and a much more time-efficient listing application process, he said.

The surge came as tensions between the world’s two biggest economies spilled over this year, in everything from trade to markets. US President Donald Trump in May said he was “looking at” Chinese companies that don’t follow US accounting rules.

In August, American regulators threatened to ban Chinese companies from listing in the US, citing Beijing’s refusal to allow inspections of the firms’ audits.

For some, the threat of future delisting didn’t put them off. Online property platform KE Holdings in July raised US$2.4 billion in this year’s biggest US IPO by a Chinese firm, followed by electric carmaker XPeng’s US$1.7 billion offering two weeks later.

Still, the US is only getting a fraction of the business. China and Hong Kong picked up 86 per cent of the US$94.7 billion that Chinese companies have raised globally through initial offerings this year, data compiled by Bloomberg shows.

Ant Group’s impending simultaneous listings in Hong Kong and Shanghai could pull in as much as US$35 billion. Ride-hailing app Dida became the latest to join the rush, filing preliminary documents on Thursday (Oct 8) for a Hong Kong listing.

One reason Chinese companies are choosing to go public in the US rather than closer to home is that unlike in their local markets, the US allows companies to list even if they are not yet profitable.

In Hong Kong, only biotech firms and those with dual-class share structures are exempt from the requirement. Miniso reported a loss of US$37 million for the first six months in 2020, according to its filing. XPeng was also loss-making when it debuted in the US.

“Most of these pre-profit companies will find it hard to do fundraising in Hong Kong,” said Steven Leung, a Hong Kong-based executive director at UOB Kay Hian.

“Chinese companies prefer listing in the US over the Star board in Shanghai as the fundraising will be in foreign currency than renminbi, which could help their overseas expansion, and will be subject to less capital-control restrictions.”

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