Analysis: U.S. IPO Market a Danger Zone for Chinese Firms after Beijing Crackdown

Analysis: U.S. IPO Market a Danger Zone for Chinese Firms after Beijing Crackdown

HONG KONG / NEW YORK, July (Reuters) – China has shut down its foreign list of companies and ride-hailing giant Didi Global Inc. (DIDINN) shortly after its debut in New York, for listings in the United States, bankers and investors d. Beijing on Tuesday said it would strengthen oversight of all Chinese companies listed offshore and tighten rules for cross-border data flows, a regulatory shift ready to consider the long-term value of IPO-based companies, they said.

Bankers and investors expect the move to slow down just days after Beijing’s decision to step up surveillance of official-listed firms, prompting investors to launch a late cyber security probe. Suffice it to say that Fred Hu, chairman of Primera Capital Group, said “those Chinese companies that are already planning to be listed in the United States will have to take a break or even abandon the plans altogether.” “The U.S. market is not limited, at least for now,” said Hu, whose portfolio of private equity firms includes a number of technology companies that have gone public abroad. “… There is a lot of existence for both the technology company and a country like China.”

Over the past decade, U.S. capital markets have become a lucrative source of funding for Chinese firms, especially as technology firms are tapping their price and liquidity pool to match their peers listed there. 

Of the 34 proposals listed by Chinese companies in the United States, a record $12.5 billion has been raised so far in 2021, according to refinancing data, better than the new list of $1.9 billion in 14 contracts in the previous year. Analysts say China’s move to take a closer look at expatriate companies has added a new level of uncertainty for companies already fighting to escalate tensions between Beijing and Washington over a wide range of issues.

“The message is that for a successful overseas list, Chinese regulators must be involved, as well as engage in international cooperation with foreign regulators,” said Louis Law, director of investment at Brands Investment Partners in California.