Chinese self-driving company WeRide was listed on the Nasdaq on Friday, October 25, 2024.
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BEIJING – Chinese IPOs in the United States and Hong Kong are set to increase next year, as some high-profile listings outside the mainland this year spark investor optimism about lucrative exits, analysts said.
Chinese self-driving company We are riding It listed on the Nasdaq on Friday with its shares up nearly 6.8%. Earlier this month, Chinese bot operator Pony.ai also filed paperwork to list on the Nasdaq. Both companies have long aimed to go public.
A few large companies based in China have listed in New York since Didi's IPO in the summer of 2021, leading to increased scrutiny by US and Chinese regulators on such listings. The Chinese ride-hailing company was forced to temporarily suspend new user registrations, and was delisted in less than a year.
US and Chinese authorities have since clarified the process of a China-based company going public in New York. But geopolitical factors and market changes have led to a significant decline in IPOs of Chinese companies in the United States.
“After two years of slowdown, we generally expect the IPO market to rebound in 2025, supported by lower interest rates and (to some extent) the conclusion of the US presidential election,” said Hong Kong-based global co-president Marcia Ellis. Morrison Forrester of the private equity practice said in an email.
“While there is a market perception of regulatory issues between the U.S. and China as problematic, many of the issues that led to this perception have been resolved,” she said.
“Chinese companies are becoming increasingly interested in listing in Hong Kong or New York, due to the difficulty of listing in mainland China and pressure from shareholders to achieve a quick exit.”
This year, as many as 42 companies have gone public on the Hong Kong Stock Exchange, and there were 96 IPO applications awaiting listing or in processing as of September 30, according to the exchange's website.
last week, Horizon Robotics – A Chinese company specializing in developing artificial intelligence and car chips – and a state-owned bottled water company CR drink It was released to the public in Hong Kong.
The two were the largest IPOs on the stock exchange this year, excluding listings of companies that also trade on the mainland, according to Renaissance Capital, which tracks global IPOs. The company noted that Chinese delivery giant SF Express is planning an initial public offering in Hong Kong next month, while Chinese automaker Chery aims to go public next year.
However, the overall pace of IPOs in Hong Kong this year is a little slower than expected, George Chan, global IPOs leader at EY, told CNBC in an interview earlier this month.
He said the fourth quarter is generally not a good period for listing, and he expects most companies to wait until at least February. Chan said that in his conversations with early-stage investors, “they are very optimistic about next year” and are preparing companies for initial public offerings.
He said the planned listings are generally life sciences, technology or consumer companies.
Hong Kong, then New York
Investor sentiment on Chinese stocks has improved over the past few weeks thanks to high-level stimulus announcements. Low interest rates also make stocks more attractive than bonds. The Hang Seng Index has risen more than 20% so far this year after four consecutive years of decline.
Many Chinese companies listing in Hong Kong also see it as a way to test investors' appetite for an IPO in another country, said Robin Lai, vice president of capital for Greater China at Preqin.
“Geopolitical tensions make Hong Kong a favored market,” Ellis said, “but the depth and breadth of US capital markets still makes many companies seriously consider New York, especially those focused on high-tech and not yet profitable, which they sometimes think and that private equity stories Their will be better received by American investors.
Just over half of initial public offerings on U.S. exchanges since 2023 have come from foreign companies, the highest level in 20 years, according to EY.
Chinese electric car company backed by Geely Remember And owned by the Chinese Amer Sports Both listed in the US earlier this year, according to EY's list of major cross-border IPOs.
Chinese electric truck maker Windrose said it intends to list in the United States in the first half of 2025, with a dual listing in Europe later that year. The company, which aims to deliver 10,000 trucks by 2027, announced on Sunday that it had moved its global headquarters to Belgium.
A rebound in Chinese IPOs in the US and Hong Kong could help funds make money from their early-stage investments in startups. The lack of IPOs has reduced the incentive for funds to support startups.
Preqin's Lai said investors are now looking to China again, having recently deployed capital in India and the Middle East. “I definitely see greater potential from now in China whether it is the return of funds, the valuation of companies, the exit environment (or) the performance of funds.”
While the recovery in investor activity is far from the levels seen in the past two years, the emerging recovery includes some investments in consumer products such as milk tea and supermarkets, Lai said.
