China's unicorns race to public markets as Silicon Valley waits

Hong Kong

US tech titans are sitting on at least US$60 billion of untapped paper wealth, choosing to stay private for longer. Their counterparts in China are taking a different path, rushing to the public markets to cash in.

Five initial public offerings (IPOs) have helped at least 16 tech bigwigs ring up a combined US$48 billion of net worth at the time of the IPOs, according to data compiled by the Bloomberg Billionaires Index. Half of them are co-founders of Xiaomi Corp, with shares of the smartphone maker valued at US$26.5 billion on its July 9 debut. Pinduoduo Inc chief executive officer Colin Huang was worth US$9.9 billion two weeks later, when the e-commerce platform went public in the US at US$19 a share.

China's unicorns - private companies valued at more than US$1 billion - "are more opportunistic" when it comes to timing their IPOs, said Kevin Diao, CEO of Meixin Global Inc, an online asset management platform that offers unicorn investment products. "If they achieved better financial performance at the end of 2017, they'll seek an offering this year because they're not sure whether their growth can sustain and support the valuation."

Xiaomi's 2017 revenue, for example, surged 67 per cent from a year earlier after posting annual growth of just 2.4 per cent in 2016. Revenue at Meituan Dianping, another e-commerce platform that's set to go public this week, climbed 161 per cent last year after more than tripling in 2016.

The rapid creation of wealth is taking place even as other tycoons are seeing declines in their fortunes. Twelve Chinese tech billionaires on the Bloomberg index have collectively lost US$12.1 billion this year as at Sept 18, led by Netease Inc's William Ding, who's down almost US$8.5 billion as shares of the game developer have plunged. The MSCI AC Asia Information Technology Index dropped 11 per cent in 2018.

Silicon Valley has had fewer unicorn IPOs this year, even as valuations for firms such as Uber Technologies Inc have soared.

Staying private can keep companies focused on the long term, and avoid wild swings in value caused by changes in the stock market. But it doesn't guarantee a higher valuation each round. BLOOMBERG