China's Dada set to upsize its US IPO amid strong demand: sources

[NEW YORK] China's online grocery firm Dada Nexus is looking to increase the size of its US initial public offering (IPO) by more than a quarter, people familiar with the matter said on Thursday, as investors brushed off concerns about the auditing standards of Chinese companies pursuing US listings.

Dada's stock market debut, due on Friday, is the latest US IPO by a Chinese company to come after the Covid-19 pandemic rattled the stock market and further soured already tense relations between Washington and Beijing.

On Thursday, US Secretary of State Mike Pompeo warned American investors against "fraudulent" accounting practices of China-based companies.

Dada is seeking to sell 21 million Depository Shares (ADS) at US$16 each, raising US$336 million, the sources said, cautioning that the price and deal size remained subject to change. The company on Monday had set a price range of US$15 to US$17 for 16.5 million ADS in the IPO.

E-commerce giant JD.Com and Walmart, existing investors in the company, had expressed interest in buying up to US$60 million and US$30 million respectively in the IPO, according to Dada's regulatory filing.

Dada declined to comment. The sources requested anonymity as the matter is private.

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Nasdaq, the exchange hosting Dada's IPO, tightened its listing rules last month, in a bid to curb IPOs of Chinese companies closely held by insiders and with opaque accounting.

Last month, the US Senate passed a bill which, if enacted into law, would make US-listed companies subject to inspection by the Public Company Accounting Oversight Board. It would delist the companies that failed to comply.

The new scrutiny of Chinese IPOs has been driven, at least in part, by Luckin Coffee's accounting issues. The Chinese coffee chain said in May that Nasdaq had notified it of plans to delist it from the exchange, a month after it disclosed that some employees had fabricated sales accounts.

In early May, China's Kingsoft Cloud Holdings also completed a US listing.

Dada is set to begin trading on the Nasdaq on Friday under the symbol "DADA". Goldman Sachs, BofA Securities and Jefferies are the lead underwriters to Dada's IPO. 

REUTERS