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As China gets stricter with its regulatory rules, a lot of issuers get more panicking, but Hong Kong’s IPO pipeline continues to remain strong.
The Nasdaq-listed Li Auto, whose electric cars are making waves in the Asian market, finally sold off its shares for 118 Hong Kong dollars per share. Li Auto’s shares sale was in a bid to raise enough in making a debut.
The company followed its close rival capital raising tactics, Xpeng, in raising 11.6 billion Hong-Kong dollars ($1.49 billion) altogether.
The dual-primary listing employed by Li Auto, just like their rival, Xpeng, called for this oversight. It allows the electric car company to be listed in the US and Hong Kong, making both shares on both Stock Markets follow closely with one another. The evidence can be seen in the US Li Auto listed shares which ended yesterday with 1% higher than Hong-Kong listed shares.
Both Xpeng and Nio have more cars on the market than Li Auto, whose Li-One SUV is currently its only product on the market. However, thanks to investors’ enthusiasm about the electric car industry, Li Auto had been able to capitalize on that and raised debut money by selling its shares. The US-China hegemony is also a reason.
Li Auto had said the proceeds from the sale of its shares would be used to introduce new car models, expand production capacity, and establish more retail stores. It should also be recalled that the US Securities and Exchange Commission had become stricter with new rules that promise to delist erring companies.
IPOs in Hong Kong Still Raging Strong
As China gets stricter with its regulatory rules, a lot of issuers get more panicking, but Hong Kong’s IPO pipeline continues to remain strong. In an interview with CNBC, Nicolas Aguzin of HKEX made this statement. He said, “Over the long term, right now, we’re looking at the pipeline; there are over 200 companies … with their filings in the docket.”
Mr Aguzin made it known that the Hong Kong Exchange And Clearing have reportedly recorded profits in the first six months of 2021 consecutively. However, caution should not be thrown into the wind as Chinese regulations become stiffer.
He further explained his opinion by saying, “In the short term, obviously … this movement will cause some potential issuers to be a little bit more careful and try to see when it’s the right time to go to the market.”
A week ago, Tencent saw a 10% dip in its shares after China released an article that likened gaming to “opium”. As a response to the move by China, Aguzin opined that:
“When you have volatility, it’s usually a little less likely that people will want to rush into the market. But over the long term, right now, we’re looking at the pipeline; there are over 200 companies … with their filings in the docket.”
HKEX listed 46 companies from January to June. About $27.2 billion has been raised so far. This is a 128% increase against the previous year, making Hong Kong the third in IPO fundraise globally.