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By permitting companies to seek targeted growth, the expectation is that the economy will become more functional and that it may attract other global players to its shores.
JD Tech, the technology offshoot of the Chinese multinational retail firm, JD.com Inc (HKG: 9618) has revived its Initial Public Offering (IPO) which was botched earlier in the year. As reported by Reuters citing people familiar with the matter, the proposed IPO is billed to be floated before the end of the year, highlighting the sense of urgency that the firm is attaching to the push.
JD Tech made an attempt to go public earlier in the year but failed to gain the regulatory approval to do so. As a Chinese entity, the company requires approval from the foreign office of the China Securities Regulatory Commission (CSRC) to list anywhere offshore including the controlled island of Hong Kong.
It is unclear whether the company has now received the approval to list this time around, but the anonymous sources confirmed that the contracted banks have started working on the IPO since October. The sources said the size of the IPO may be significantly lower than the $2 billion that was planned earlier, however, it is still bound to be one of the biggest IPOs in the region since the COVID-19 pandemic era.
The IPO valuation that has been tapered down, if confirmed, further underscores the bearish sentiment that is engulfing the capital market across the board. Thus far this year, the total size of IPOs in Hong Kong thus far this year is worth $10.3 billion. This valuation pales when compared to the $37.7 billion recorded for the same time span last year.
With receding economic and growing inflation, the appetite for spending amongst investors has generally waned, a trend that is not peculiar to just the Chinese or Hong Kong market alone.
JD Tech IPO: Test of China’s Renewed Liberal Stance
Should JD Tech succeed in floating the IPO as noted, it will come as one of the highest-profile public listings of a major tech company. Pointedly, it will mark the start of a renewed liberal stance for Chinese regulators who have notably handled homegrown tech companies with an iron hand, especially with respect to capital financing.
There are speculations that the Chinese government is trying to rebuild the economy in the aftermath of the COVID-19 pandemic and the economic impacts of lockdowns that were experienced across the board.
By permitting companies to seek targeted growth, the expectation is that the economy will become more functional and that it may attract other global players to its shores. The leniency from the regulators may also rekindle the interests of Ant Group whose mega billion IPO also hit a hard rock back in 2020.
The IPO of JD Tech will be a stress test that will go a long way to reposition the Chinese economy as a hub for companies, particularly the tech-focused ones to thrive.