Chinese Firms Grab The Bull, Set To Flood Wall Street

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Chinese companies are listing in the U.S. at the fastest pace ever.

The firms are brushing off tensions between the world’s two biggest economies and the continued risk of being kicked off American exchanges.

Firms from the mainland and Hong Kong have raised $6.6 billion through initial public offerings in the U.S. this year.

This is a record start to a year and an eightfold increase from the same period in 2020, data compiled by Bloomberg show.

The largest IPO is the $1.6 billion listing of e-cigarette maker RLX Technology Inc., followed by the $947 million offering of software company Tuya Inc.

That’s even as Sino-U.S. tensions show few signs of easing and the threat of Chinese firms being delisted from U.S. exchanges remains.

In fact, the U.S. Securities and Exchange Commission said last month it would begin implementing a law forcing accounting firms to let U.S. regulators review the financial audits of overseas companies.

Non-compliance could result in a delisting from the New York Stock Exchange or Nasdaq.

The risk for mainland firms is high given China has long refused to let U.S. regulators examine audits of its overseas-listed companies on national security concerns.

Despite all the risks, the pipeline continues to grow, setting up 2021 to potentially exceed last year.

Chinese firms raised almost $15 billion through U.S. IPOs in 2020, the second highest on record after 2014, when e-commerce giant Alibaba Group Holding Ltd. fetched $25 billion in its float.

Didi Chuxing has filed confidentially for a multi-billion-dollar U.S. IPO that could value the Chinese ride-hailing giant at as much as $100 billion, PageOne has reported.

Uber-like trucking startup Full Truck Alliance is also working on a U.S. listing this year that could raise about $2 billion, sources say.

Additional share sales by Chinese companies have also been well-received in the U.S. this year, delivering an average return of 11% from their offering prices in the following session, according to data compiled by Bloomberg.

And while rival financial centers like Hong Kong have in recent years changed their listing rules to make it easier for new economy firms to go public there, that has not stopped the flow of firms going stateside.

In fact, the traffic now goes both ways, with U.S.-traded Chinese firms getting a second listing in Hong Kong to expand their investor base and as a hedge against the delisting risk.

Such secondary listings raised almost $17 billion last year and have fetched over $8 billion this year already, Bloomberg data show.

Bankers said many companies go to the U.S. knowing they can subsequently list in Hong Kong.

Some have had it rough though. TikTok parent ByteDance Ltd.’s IPO plans have been put on hold as it seeks to comply with regulatory demands from both China and the U.S., the South China Morning Post reported on Saturday.

The world’s most valuable startup is struggling to find a business structure that satisfies both Beijing and Washington, the report said, with the separation of Douyin, the domestic version of TikTok, from its global peer posing a particular challenge.

U.S. capital markets have long attracted Chinese companies for a number of reasons: their greater liquidity, broader investor base, and the cachet associated with a U.S. listing.

Technology and fintech firms have flocked to the U.S. because of its more streamlined process as well as greater openness to loss-making businesses.

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