China firms are listing in the US at a record-breaking pace

Hong Kong

CHINESE companies are listing in the US at the fastest pace ever, brushing off tensions between the world's two biggest economies and the continued risk of being kicked off American exchanges.

Firms from the mainland and Hong Kong have raised US$6.6 billion through initial public offerings in the US this year, a record start to a year and an eight-fold increase from the same period in 2020, data compiled by Bloomberg show. The largest IPO is the US$1.6 billion listing of e-cigarette maker RLX Technology, followed by the US$947 million offering of software company Tuya.

That's even as Sino-US tensions show few signs of easing and the threat of Chinese firms being delisted from US exchanges remains.

In fact, the US Securities and Exchange Commission said last month that it would begin implementing a law forcing accounting firms to let US regulators review the financial audits of overseas companies.

Non-compliance could result in a delisting from the New York Stock Exchange or Nasdaq. The risk for mainland firms is high given China has long refused to let US regulators examine audits of its overseas-listed companies on national security concerns.

Chinese firms raised almost US$15 billion through US IPOs in 2020, the second highest on record after 2014, when e-commerce giant Alibaba Group Holding fetched US$25 billion in its float.

Didi Chuxing has filed confidentially for a multi-billion-dollar US IPO that could value the Chinese ride-hailing giant at as much as US$100 billion, Bloomberg News has reported.

Uber-like trucking startup Full Truck Alliance is also working on a US listing this year that could raise about US$2 billion, sources said.

"Chinese companies in the new economy do not seem to have been deterred from seeking US listings despite the ongoing tensions," said Calvin Lai, a partner at Freshfields Bruckhaus Deringer. "They take that as one of the risks but that doesn't tilt the pendulum."

Additional share sales by Chinese companies have also been well-received in the US this year, delivering an average return of 11 per cent from their offering prices in the following session, according to data compiled by Bloomberg.

And while rival financial centres like Hong Kong have in recent years changed their listing rules to make it easier for new economy firms to go public there, that has not stopped the flow of firms going stateside. In fact, the traffic now goes both ways, with US-traded Chinese firms getting a second listing in Hong Kong to expand their investor base and as a hedge against the delisting risk.

Such secondary listings raised almost US$17 billion last year and have fetched over US$8 billion this year already, Bloomberg data show. Bankers said many companies go to the US knowing they can subsequently list in Hong Kong.

US capital markets have long attracted Chinese companies for a number of reasons: their greater liquidity, broader investor base, and the cachet associated with a US listing.

Technology and fintech firms have flocked to the US because of its more streamlined process as well as greater openness to loss-making businesses. BLOOMBERG