Chinese Tech Firms set to List Shares back Home amid Poor Performance abroad

By Joyce Yu

Despite market volatility, IPO spree by Chinese tech companies in overseas market seems to continue, from iQiyi which just debuted on the Nasdaq in March, to Xiaomi which recently filed paperwork for a Hong Kong listing. Contrary to the hype around Chinese tech IPOs, many of them struggle with poor stock performance.

About 16 Asian tech or internet companies have listed their stocks in New York or Hong Kong since the start of 2017, but 12 of them – mostly from China – have been trading below their offering prices, according to data from Dealogic and FactSet. Notably, shares in video streaming platform iQiyi, sank on debut, closing down more than 13% and falling below its IPO offer price of $18 each.

Gone are the days when Chinese internet giants Alibaba and Tencent Holdings had their shares doubled in a year. In the coming months, the market could see Chinese companies selling at least $50 billion in new shares, according to a Wall Street Journal report. The first will likely be smartphone maker Xiaomi Corp. with valuation speculation of $70 billion to $80 billion.

Some bankers and deal advisers, however, remain wary about Xiaomi’s coming share sale. “If you had asked me six months ago, I’d say ‘no problem’ for many of these companies looking to go public,” Timothy Atwill, head of investment strategy at Seattle-based Parametric Portfolio Associates, which manages $14 billion in assets in China and other emerging markets, told the Wall Street Journal. “Asia tech was very much in favor…but 2018 so far has been a very uneven return story.”

Given the weak performance in overseas market, it seems not a bad timing for China to lure tech firms home, as many market watchers have speculated. It is reported that, under a program known as China Depository Receipts (CDR), big Chinese companies in high-tech industries will be encouraged to float their shares in either Shanghai or Shenzhen. They can do so while maintaining any existing overseas listings.

The Shanghai and Shenzhen stock exchanges are less attractive when compared with exchanges in New York and Hong Kong for a range of stringent requirements. For instance, they don’t allow dual class shares, which give certain stock holders more power than others and are common in the United States. But now the Chinese government has a plan to loosen some of the restrictions. Furthermore, China, as the second biggest in the world, has some appeal. Chinese investors are also often willing to pay more for stocks, based on company earnings, than their US counterparts, analysts say.