Megan Tobin
There was a time when initial public offerings (IPOs) of Chinese internet companies were the hottest topic on Wall Street.
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Ten years ago, as e-commerce giant Alibaba prepared to list on the New York Stock Exchange, the world's biggest banks competed fiercely to underwrite the listing. Stock traders wearing Alibaba's trademark orange hoodies over their suits cheered when the opening bell rang on Sept. 19, 2014. The IPO raised $25 billion, making it the largest public listing in history at the time. In the years that followed, scores of Chinese companies raised billions of dollars in the U.S.
Those days are well and truly behind us. Wall Street hasn't seen anything close to a blockbuster IPO from a Chinese company in three years. In fact, the situation is getting worse: So far this year, Chinese companies have raised about $580 million through U.S. listings, almost all of it in a single IPO by electric-vehicle maker Zeeker last month.
As geopolitical relations between China and the United States deteriorate, it is becoming increasingly difficult for Chinese companies to find overseas markets where their listings are not jeopardized by political scrutiny.
The situation in China is no better. As part of tightening control over the Chinese market, regulators have tightened IPOs and significantly slowed the pace of domestic listings. About 40 Chinese companies have listed locally this year. They have raised less than $3 billion, according to Dealogic data, a fraction of what would normally be raised by this time of year.
If the current pace continues, this year will see the world's lowest number of initial public offerings (IPOs) by Chinese companies in more than a decade.
The slowdown marks a shift from when multi-billion-dollar public offerings by Chinese tech companies underpinned a golden age of private Chinese business. The cash bonanzas from those offerings transformed the way startups raised capital, attracting more private capital from outside China while allowing domestic and foreign investors to move money abroad.
The shift shows how China's top leader, Xi Jinping, has reshaped private enterprise, placing it firmly under the control of the government and the Communist Party. Authorities have forced successful companies off public stock markets, jailed entrepreneurs and suddenly barred fast-growing industries from turning a profit.
“A lot of the ways that money was being spent through the private sector and stock markets were potential risks to party influence,” said Andrew Collier, managing director at Orient Capital, an economic research firm in Hong Kong.
The uncertainty created by President Xi Jinping's crackdown has wiped billions of dollars in value from China's high-tech industry and caused U.S. venture capital firms to drastically scale back their investments in China.
At the same time, Chinese companies are nervous about the scrutiny they could face if they try to go public in the U.S. amid rising tensions between Washington and Beijing.“No one really wants to go under the radar,” said Murong Yang, managing director at Future Capital Discovery Fund in Beijing.
In February, following reports that China-founded online shopping company SHEIN was seeking to go public in the United States, Senator Marco Rubio called on the chairman of the Securities and Exchange Commission to block the listing if the company refused to disclose information about its ties to the Chinese government.
“The markets Chinese companies choose to list in now are driven by factors that are a product of geopolitical considerations as well as the company's fundamental business value,” said Linda Yu, a U.S.-based investor who previously worked with Japanese tech giants SoftBank and Warburg Pincus on China investments.
Four or five years ago, successful Chinese companies with large market caps were likely candidates for share sales.
“The question then was, 'Why haven't you listed overseas yet?'” Yu said. “Now it's, 'Why would you list?'”
Most of the Chinese companies currently listed on U.S. stock exchanges did so between 2018 and 2021, a period during which investors vied for shares in startups such as Full Truck Alliance, which develops an app that connects freight customers with truck drivers, and Kanzhun, which runs a recruitment platform.
©2024 The New York Times News Service
