By Meaghan Tobin
There was a time when the initial public offering (IPO) of a Chinese internet company was the hottest thing on Wall Street.
When e-commerce giant Alibaba prepared to go public on the New York Stock Exchange a decade ago, the world’s largest banks competed fiercely to underwrite the offering. When the opening bell rang on September 19, 2014, stock traders cheered and wore hoodies in Alibaba’s signature orange over their suits. The IPO raised $25 billion, the largest listing ever at the time. Dozens of other Chinese companies will raise billions in the United States in the coming years.
Those days are definitely a thing of the past. Wall Street hasn’t seen anything close to a successful Chinese IPO in three years. In fact, the drought is getting worse. So far this year, Chinese companies have raised about $580 million in U.S. listings, almost all of which came last month through an initial public offering by electric vehicle maker Zeekr.
As the geopolitical relationship between China and the United States has deteriorated, it has become increasingly difficult for Chinese companies to find a foreign market where a listing may not be jeopardized by political scrutiny.
Things are hardly looking better in China. As part of an effort by Beijing to gain more control over the Chinese market, regulators have made it harder to go public, dramatically slowing the pace of domestic listings. About 40 Chinese companies have gone public this year. They’ve raised less than $3 billion, a fraction of the value normally raised at this point in the year, according to Dealogic data.
If the current pace continues, this year will see the fewest Chinese IPOs globally in more than a decade.
The slowdown marks a major shift from a period when multibillion-dollar listings of Chinese tech companies helped create a Gilded Age of private companies in China. The former listing premium has reshaped how startups raised money, attracting more private capital from outside China while allowing foreign and domestic investors to move money out of the country.
The shift shows how China’s top leader, Xi Jinping, has reshaped private business and brought it firmly under the control of the government and the Chinese Communist Party. Officials have driven successful companies from public stock markets, jailed entrepreneurs and abruptly excluded booming industries from making profits.
“Much of this capital use that occurred through the private sector and the stock market posed a potential risk to the party’s influence,” said Andrew Collier, director of Orient Capital, an economic research firm in Hong Kong.
The uncertainty brought on by Xi’s crackdown has sucked billions of dollars in value from China’s tech industry and prompted U.S. venture capital firms to dramatically scale back their investments in China.
At the same time, Chinese companies are unsure about the criticism they could face if they want to go public in the US as tensions between Washington and Beijing escalate. “No one really wants to test the waters,” said Murong Yang, director of the Future Capital Discovery Fund in Beijing.
In February, following reports that Shein, the Chinese-founded online shopping company, was seeking to go public in the United States, Senator Marco Rubio urged the head of the Securities and Exchange Commission to block the listing if the company refused to provide information about to share ties. to the Chinese government.
“The market a Chinese company chooses to list in today is influenced by factors other than its fundamental business value – it is a product of geopolitical considerations,” said Linda Yu, a US-based investor who previously worked with SoftBank , the Japanese technology giant. and Warburg Pincus to invest in China.
Four or five years ago, a successful Chinese company with a hold on a large market was a promising candidate for selling shares.
“The question asked at the time was: ‘Why haven’t you registered abroad yet?’” Yu said. “But now it’s changed to ‘Why would you?'”
Most Chinese companies currently listed on US stock exchanges went public between 2018 and 2021, as investors scrambled to acquire shares in startups like Full Truck Alliance, whose apps connect freight customers and truck drivers, and Kanzhun , which runs a job search platform.
©2024 The New York Times News Service
First print: June 26, 2024 | 12:38 pm IST