Some Chinese companies are starting to re-list in the US
Eduardo Munoz Alvarez Corbis News | Getty Images
BEIJING – Chinese startups are raising millions of dollars in US stock market listings again, after a dry spell in the once-hot market.
Hesai Group, which sells “lidar” technology for self-driving cars, listed on Nasdaq Thursday. Shares rose nearly 11% on debut.
The company raised $190 million in an initial public offering, more than initially planned – and one of the largest listings since ride-hailing giant Didi raised $4.4 billion in its June 2021 IPO. The listing was followed by Chinese regulators, who ordered a cybersecurity review into Didi just a few days after the public listing. The company was delisted at the end of the year.
By the end of 2022, only six China-based companies had issued American depositary receipts in US IPOs since the collapse of Didi, according to Wind Information. One such company is biotech firm LianBio, which raised $334.5 million in November 2021 – the largest to date since Didi’s listing, the data showed.
But the dry spell on Chinese IPOs in the U.S. is starting to come to an end as companies gain regulatory clarity.
One new rule announced by Chinese authorities requires operators of internet platforms with the personal information of more than 1 million users to apply for a cybersecurity review before they can list overseas.
On the U.S. side, the Public Company Accounting Oversight Board (PCAOB) reached an agreement last year with China’s securities regulator and finance ministry to review audit work papers of Chinese companies listed in the U.S.
The PCAOB said in mid-December it had obtained “full access,” eliminating short-term risks of forcing Chinese companies to delist from U.S. stock exchanges.
After the announcement, adult education companies online QuantaSing became the first China-based company to register in the US, Wind data shows.
Major investment banks Citigroup, CICC and CLSA were among the underwriters for the IPO, which raised $40.6 million. QuantaSing’s backers include Prospect Avenue Capital and Qiming Venture Partners.
Qiming also backed two other China-based companies that issued ADRs this year: biotech companies Structure Therapeutics and Hesai.
This year’s Hesai savings
The three companies, all of which are listed on Nasdaq, specify the level of risk from US and Chinese regulators in their respective prospectuses:
- Hesai, which sells the technology to Chinese automakers Li Auto and the US company, said it received written confirmation from China’s cybersecurity regulator that it did not need to apply for a cyber review if it did not have the personal information of more than 1 million users.
- QuantaSing said it had the user’s information and completed a cybersecurity review in August 2022.
- Structure Therapeutics said it has not received notice from Chinese regulators requiring the company to undergo a cybersecurity review.
The companies said that US authorities would determine that they could not complete their review of the audit work, putting the companies at risk of delisting.
If the first round of this offer is successful in pricing, I suspect it will open the floodgates.
Drew Bernstein
Co-Chairman, Marcum Asia CPAs LLP
Going forward, more Chinese companies are starting to prepare to list in the US
Drew Bernstein, co-chairman of audit firm Marcum Asia CPAs LLP, said Thursday his firm is working with about 50 companies – mostly based in China – that plan to list in the US. ,” he said.
“If the first round of this deal is successful in terms of price, I would suspect it will open the floodgates,” Bernstein said.
However, he expects it will take a long time for the IPO to return to the market, especially since it is still difficult for people to obtain visas and travel in and out of China.
