Chinese IPOs Making Comeback to US Following Reviewed Listing Rules

UTC by Tolu Ajiboye · 3 min read
Chinese IPOs Making Comeback to US Following Reviewed Listing Rules
Photo: Depositphotos

Hesai Group, QuantaSing, and Structure Therapeutics are some Chinese IPOs to see a recent US listing, but they might not be the last. 

According to a CNBC report, Chinese initial public offerings (IPOs) are making a return to the US stock market. Several Chinese startups seek substantial capital in US listings again following a sustained dry spell. The development of more regulatory clarity regarding US stock market listings is also contributing to the resurgence of Chinese IPOs.

One Chinese company recently listed in America is the automobile tech-driven platform Hesai Group. The firm saw its shares climb approximately 11% after its debut on the Nasdaq Thursday.

Hesai Group exceeded its IPO target by raising $190 million, one of the most prominent since Didi’s $4.4 billion efforts in June 2021. However, at the time, the Chinese ride-hailing giant’s US IPO contravened Chinese regulations that also sparked a cybersecurity review into Didi. The Beijing-based company ended up delisting later that same year in December.

Online adult education company QuantaSing is one of the Chinese companies to list in the US following eligibility reviews. The company’s IPO, which raised $40.6 million, was underwritten by leading investment banks such as Citigroup (NYSE: C), CICC, and CLSA. Furthermore, QuantaSing also enjoyed the backing of investment firms such as Prospect Avenue Capital and Qiming Venture Partners.

Additionally, QuantaSing supported two other China-based companies that issued ADRs this year, namely Hesai and the biotech platform Structure Therapeutics.

In their respective prospectus, Hesai, QuantaSing, and Structure Therapeutics all specified associated levels of US and Chinese regulatory risks. According to Hesai, China’s cybersecurity regulator informed the company that a cyber review is unnecessary if it doesn’t have the personal information of over 1 million users. QuantaSing claimed it had that information and subsequently completed a cybersecurity review last August. Furthermore, Structure Therapeutics allegedly did not receive any notice from Chinese regulators regarding a cybersecurity review.

New Listing Requirements Favor Increased Chinese US-listed IPOs

The cybersecurity review is the most notable among a set of new rules by Chinese authorities regarding overseas listings by local internet platform operators. Meanwhile, in the US, the Public Company Accounting Oversight Board (PCAOB) agreed last year to inspect the audit work papers of US-listed Chinese firms. The PCAOB reached this agreement with China’s securities regulator and finance ministry, also explaining that it secured “complete access.” This development negates the near-term threat that Chinese companies may face to delist from US bourses.

The US-Chinese regulatory developments have opened the floodgates to Chinese listings on US stock exchanges. As several more Chinese firms pursue US listings, Marcum Asia CPAs LLP co-chairman Drew Bernstein weighed in on the positive outlook. According to Bernstein, his company is working with around 50, primarily Chinese-based, companies to list in America. Furthermore, Bernstein also described such company endeavors as “probably the strongest pipeline our firm has had in its history.”

However, despite the perceived eagerness from East Asia, he noted that it might be a while before many IPOs return to the market. According to him, it still proves difficult for people to obtain visas to travel to and from China.

Business News, IPO News, Market News, News
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