Chinese language autonomous driving firm WeRide listed on the Nasdaq on Friday, Oct. 25, 2024.
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BEIJING — Chinese language IPOs within the U.S. and Hong Kong are set to extend subsequent yr, analysts mentioned, as some high-profile listings exterior the mainland this yr elevate investor optimism over worthwhile exits.
Chinese language autonomous driving firm WeRide listed on the Nasdaq Friday with shares rising practically 6.8%. Earlier this month, Chinese language robotaxi operator Pony.ai additionally filed paperwork to listing on the Nasdaq. Each corporations have lengthy aimed to go public.
Few massive China-based corporations have listed in New York because the Didi IPO in the summertime of 2021 elevated scrutiny by U.S. and Chinese language regulators on such listings. The Chinese language ride-hailing firm was compelled to quickly droop new person registrations, and acquired delisted in lower than a yr.
U.S. and Chinese language authorities have since clarified the method for a China-based firm to go public in New York. However geopolitics and market modifications have considerably lowered U.S. IPOs of Chinese language companies.
“After a few sluggish years, we typically count on the IPO market to revive in 2025, bolstered by rate of interest decreases and (to some extent) the conclusion of the U.S. presidential election,” Marcia Ellis, Hong Kong-based international co-chair of personal fairness apply, Morrison Foerster, mentioned in an e-mail.
“Whereas there’s a market notion of regulatory points between the U.S. and China as being problematic, most of the points driving this notion have been solved,” she mentioned.
“Chinese language corporations have gotten more and more concerned with getting listed in Hong Kong or New York, as a result of problem in getting listed in Mainland China and stress from shareholders to shortly obtain an exit.”
This yr, as many as 42 corporations have gone public on the Hong Kong Inventory Change, and there have been 96 IPO purposes pending itemizing or beneath processing as of Sept. 30, in line with the trade’s web site.
Final week, Horizon Robotics — a Chinese language synthetic intelligence and auto chip developer — and state-owned bottled water firm CR Beverage went public in Hong Kong.
The 2 have been the trade’s largest IPOs of the yr, excluding listings of corporations that additionally commerce within the mainland, in line with Renaissance Capital, which tracks international IPOs. The agency famous that Chinese language supply large SF Categorical is planning for a Hong Kong IPO subsequent month, whereas Chinese language automaker Chery goals for one subsequent yr.
Nonetheless, the general tempo of Hong Kong IPOs this yr is barely slower than anticipated, George Chan, international IPO chief at EY, instructed CNBC in an interview earlier this month.
He mentioned the fourth quarter is usually not interval for listings and expects most corporations to attend till at the least February. In his conversations with early stage traders, “they’re very optimistic about subsequent yr” and are getting ready corporations for IPOs, Chan mentioned.
The deliberate listings are typically life sciences, tech or shopper corporations, he mentioned.
Hong Kong, then New York
Investor sentiment on Chinese language shares has improved over the previous few weeks because of high-level stimulus bulletins. Decrease rates of interest additionally make shares extra enticing than bonds. The Dangle Seng Index has surged over 20% thus far this yr after 4 straight years of declines.
Many Chinese language corporations that listing in Hong Kong additionally see it as a technique to take a look at traders’ urge for food for an IPO overseas, mentioned Reuben Lai, vice chairman, personal capital, Larger China at Preqin.
“Geopolitical tensions make Hong Kong a most well-liked market,” Ellis mentioned, “however the depth and breadth of US capital markets nonetheless make many corporations severely think about New York, particularly for these that target superior expertise and usually are not but worthwhile, who typically imagine that their fairness tales shall be higher obtained by U.S. traders.”
Simply over half of IPOs on U.S. exchanges since 2023 have come from foreign-based corporations, a 20-year excessive, in line with EY.
Geely-backed Chinese language electrical automobile firm Zeekr and Chinese language-owned Amer Sports activities each listed within the U.S. earlier this yr, in line with EY’s listing of main cross-border IPOs.
Chinese language electrical truck producer Windrose mentioned it intends to listing within the U.S. within the first half of 2025, with a twin itemizing in Europe later that yr. The corporate, which goals to ship 10,000 vehicles by 2027, on Sunday introduced it moved its international headquarters to Belgium.
A restoration in Chinese language IPOs within the U.S. and Hong Kong can assist funds money out on their early stage investments in startups. The shortage of IPOs had lowered the motivation for funds to again startups.
Now, traders are China once more, after not too long ago deploying capital to India and the Center East, Preqin’s Lai mentioned. “I am positively seeing a larger potential from now in China whether or not it is cash coming again, valuation of the businesses, exit atmosphere [or] efficiency of the funds.”
Whereas the pickup in investor exercise is way from ranges seen within the final two years, the nascent restoration contains some investments in shopper merchandise akin to milk tea and supermarkets, Lai mentioned.
