- Smaller Chinese IPOs in very traditional brick-and-mortar type businesses are looking to list again in the U.S. under the watchful eye of regulators on both sides of the world
- Chinese listings are unlikely to do well in the immediate term because of investor wariness over Beijing’s often rapid and apparently arbitrary policy moves
Like the squirrel coming out of its burrow at the first spring thaw, Chinese companies are gingerly wading back into the U.S. capital markets to find their fortunes, wary at all times that they could be an easy lunch for a fox.
Nevertheless, as the dust settles from the disastrous IPO of Chinese ride-hailing giant Didi Global, a handful Chinese firms seeking out the depth and liquidity of U.S. capital markets will be the first to go public in the U.S. since last July.
Six Chinese and Hong Kong-based groups filed new or updated documents with the U.S. Securities and Exchange Commission for an IPO on Nasdaq in January.
What helps is that these Chinese companies, like the squirrel, are small, but investors will nonetheless be watching them closely for signs that there is still a future for the once-thriving market for Chinese listings in the U.S.
Not being mega IPOs might actually work in these Chinese firms’ favor, because they are less likely to raise Beijing’s ire at a time when the Chinese Communist Party is pursuing “common prosperity.”
Running the gauntlet of regulators (on both sides of the Pacific) may only be part of the challenge for these Chinese firms seeking out the incomparably deep pools of investor capital in the U.S. because their success is not guaranteed should they make it out the gates.
Investor sentiment towards Chinese IPOs has soured dramatically since the ruinous and forced delistings of high-profile Chinese names.
Continued regulatory uncertainty by Beijing’s various moves in sectors as disparate as real estate to afterschool education also has global investors questioning whether now is the opportune time to take a bet on China, given continuing uncertainties.
A Trump-era law that would force Chinese companies to delist if they refuse to give audit regulators access to their audited accounts still hangs over Chinese companies, meaning that even if these Chinese companies get listed, there’s no guarantee that they will stay listed.
All of which provide an unfavorable backdrop for bets on fresh Chinese IPOs even if those companies are in old economy businesses that are unlikely to draw unnecessary attention from Beijing.
