Chinese companies rush for US listings ahead of new rules from Beijing
THE number of US IPOs by Chinese firms jumped in March, as some of them rushed to set up offshore listings before rules take effect that will complicate the process. Though with markets jittery, several of the IPOs met with a tepid response.
Seven Chinese firms including Chanson International and Hongli Group launched public offerings in March to raise a combined US$82.3 million, compared with just four in the preceding two months.
Although the numbers are not huge, the surge stands out since only six mainland China-based companies launched US IPOs in 2022, as Sino-US tensions and in particular strict regulatory scrutiny on both sides hurt investor demand for such listings.
China’s new rules published in February, which take effect on March 31, are aimed at reviving the path for international offerings, which all but disappeared in the wake of regulatory crackdowns beginning in the middle of 2021.
They also impose an approval system on a once freewheeling market, with a focus on national and data security – hence the hurry from some firms to get in ahead of them.
“There is obvious acceleration in Chinese companies seeking US offerings this month, considering the uncertainty posed by the new offshore listing rules,” said Stephanie Hu, head of Asia, investment banking at EF Hutton, which was a bookrunner on Chanson’s listing.
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The new system requires submitting materials to the China Securities Regulatory Commission (CSRC) and getting the green light from relevant government bodies.
That will “reduce regulatory uncertainty” said Mandy Zhu, head of China Global Banking at UBS, and standardise domestic firms’ international listings.
It is also likely to be time consuming.
Among the new listings was bakery chain Chanson International, which debuted on the Nasdaq on Thursday (Mar 30).
“It is, indeed, that we don’t need to get approval from associated departments of China if we get listed before March 31,” chairman and chief executive officer Gang Li told Reuters.
“But we will abide by Chinese rules and carry out all follow-up work cooperation if necessary.”
The listing raised a modest US$13.6 million, and fell heavily in its first day of trading, closing almost 40 per cent below the issue price, perhaps a sign that markets roiled by banking jitters are in little mood for small Chinese listings.
Earlier in the week, steelmaker Hongli Group, food grain manufacturer YanGuFang International Group and wheelchair-maker Jin Medical International listed in the US, also receiving tepid responses from investors. REUTERS
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