Didi, Pinduoduo and others could seek homecoming on US delisting threat

Hong Kong

CHINA'S reported plan to restrict overseas listings has pundits mulling potential stock-market homecomings for the nation's largest tech companies, such as Didi Global and Pinduoduo.

China will ban companies from going public abroad through variable interest entities, a structure commonly used for high-profile listings in the US, Bloomberg News reported on Wednesday (Dec 1).

The country's securities regulator denied the story, and it is not clear whether any potential new rules would require delisting of stocks already trading abroad.

If true, the change should lead Chinese companies "back to domestic stock exchanges, including Hong Kong's stock exchange, which becomes a very attractive alternative" to US markets, said Angela Zhang, the director of the University of Hong Kong Centre for Chinese Law.

Some US-traded Chinese stocks, such as electric-vehicle makers Li Auto and XPeng, have pivoted in recent months to so-called homecoming listings in Hong Kong amid Beijing's corporate clampdown and tech battle with the US.

Companies that could follow a similar path include Didi, Hello Group, iQIYI, JOYY, and Tencent Music Entertainment Group, said Bloomberg Intelligence analysts Matthew Kanterman and Tiffany Tam.

"Chinese Internet companies with listings in the US may accelerate plans for secondary offerings in Hong Kong if regulators crack down on the use of the variable interest entity (VIE) structure," they wrote on Wednesday.

Companies using the VIE structure would be allowed to pursue initial public offerings in Hong Kong, subject to regulatory approval, said the Bloomberg News report, though even that route may be set to become more challenging.

China will require tech companies seeking a listing in the city to undergo a cybersecurity review, and they will need Beijing's approval if authorities decide there is a potential impact to national security, Bloomberg reported last month. BLOOMBERG