Chinese listings in the U.S. tailcoat despite the fundraising frenzy

More than two-thirds of Chinese groups listed in the U.S. this year have fallen below their initial public offering price, despite record levels of fundraising, as growing regulatory control affected investor sentiment .

The misbehavior of stock prices comes after 34 Chinese companies raised $ 12.4 billion in the New York fleet in the first half of 2021, according to data from research provider Dealogic, a record high in both cases. This compares to 18 listings that raised $ 2.8 billion in the same period last year.

The rise has set a record in the first half unforeseen for Wall Street, with investment banks like Goldman Sachs and Morgan Stanley generating nearly $ 460 million in commissions, according to Dealogic.

But about 70% of these Chinese companies are listed below their IPO, in part due to the effect of the growth of Beijing and Washington regulatory winds.

These include RLX Technology, China’s largest e-cigarette maker, which raised $ 1.4 billion in January. Its shares have fallen 71% after the country issued a draft regulation classifying e-cigarettes as tobacco products in March.

Didi Chuxing, the travel group that became the largest Chinese company on the list in the United States this year after raising $ 4.4 billion in New York last week, it has also been affected by regulatory oversight.

His actions he fell abruptly on Friday after Chinese cybersecurity regulator announced that Didi was under investigation. Still, Didi’s shares remain above its IPO.

The company was the largest Chinese stock exchange in the United States since Jack Ma’s e-commerce group Alibaba raised $ 25 billion in 2014, although Didi cut its initial fundraising goal from $ 7 billion.

“There are regulatory concerns for specific sectors and a general regulatory concern that stands out, so in order to reach a multimillion-dollar agreement now, it needs to be cheap to attract long-term global investors,” said a fund manager based in Hong Kong which has invested in Chinese deals in the USA.

Full Truck Alliance, which provides similar services to Uber for the Chinese transportation industry, grossed $ 1.6 billion on the New York Stock Exchange last month, but its shares have also fallen below its IPO. .

Smaller Chinese offerings have also worked poorly. MissFresh, a Chinese grocery delivery app backed by Tencent Internet group, is trading 34% below its issue price after it was made public in June. DingDong, backed by SoftBank, reduced its IPO target by more than 70% before its listing. Its shares closed flat on the first day of trading, although they have since risen by about 20 percent.

Raj Ganguly, a partner at venture capital firm B Capital Group, which invests in the United States and China, said: “For many investors. . . they prefer to invest in American technology companies or only in the main and largest Chinese technology companies ”.

Chinese companies are facing repression from both Beijing and Washington.

The first goal of technological monopolies, which included fining Alibaba a record $ 2.8 billion, has reached Chinese stocks listed on the US. The Nasdaq Golden Dragon China index, which tracks New York-listed Chinese technology stocks, is down 8%, compared to a 13% increase in the U.S.-focused Nasdaq Composite.

In the United States, Chinese companies it runs the risk of being withdrawn if they fail to meet the audit disclosure requirements. Although the increase in scrutiny has led to series of secondary listings by these groups in Hong Kong, it has not weighed on the rush to get listings in the United States.

“The maximum records [in fundraising] they have a lot more to do with the appetite of Chinese issuers than of American investors, ”said the chief service chief of a European bank in Hong Kong.