Author: Zhou Erin
Recently, companies have shown a relatively benign two-way trend in terms of listing activities.
At present, 23 Chinese concept stocks have been "secondarily listed" in Hong Kong to cope with the potential uncertainty of delisting; in addition, since the second quarter, the activities of Chinese companies going abroad for listing have gradually normalized.
On July 13, Noah Holdings was officially listed on the Hong Kong Stock Exchange.
Pan Qing, chief financial officer of Noah Holdings, told China Business News, "'Secondary listing' is more friendly to Chinese stocks, and some disclosure standards in the United States can be followed, and the company can also optimize investor structure through 'secondary listing' "According to the reporter's understanding, there are still many companies queuing up, and many companies that have successfully "secondary listing" are also considering switching to "secondary main listing", which will help companies to be included in the "Southbound Link" target. .
The reporter also learned from various sources that companies have begun to grasp the window period of "going out" recently.
Li Qin, a partner at Chengming Zezheng Law Firm, told reporters that since the "Measures for Cybersecurity Review" came into effect in February this year, companies listed in the United States that fall within the scope of supervision must first apply for cybersecurity review.
Recently, BOSS Direct Employment and Manbang announced that they "resumed the registration of new users", indicating that the "network security review" they had previously accepted or completed in stages.
Some companies still planning to go public in the United States have also started applications for cybersecurity review, which are all positive signs.
There are still many companies queuing up for "secondary listing"
Since 2020, the pace of "secondary listing" of Chinese stocks in Hong Kong has been accelerating.
UBS predicted earlier that, according to Wind data, there are 251 Chinese concept stocks listed in the United States, mainly technology and consumer companies, with a total market value of 1.71 trillion US dollars.
There are 42 Chinese companies listed for the first time in the United States that meet the requirements of "secondary listing" in Hong Kong, accounting for 46% ($543 billion) of the total market value of Chinese concept stocks.
In June 2020, JD.com and NetEase successively launched "secondary listings"; in 2021, well-known companies such as Station B also took this action.
In December 2021, the U.S. Securities and Exchange Commission (SEC) passed amendments to finalize the implementation rules of the Foreign Company Accountability Act.
Starting from the first earnings season in 2022, relevant listed companies will begin a three-year delisting evaluation period.
This further accelerated the "secondary listing" layout of Chinese concept stocks.
Baidu was "secondarily listed" on the Hong Kong Stock Exchange on March 23, 2022; "Secondary listing"), a Chinese concept stock company listed in three places in Singapore; until last week, Noah Fortune's listing on the Hong Kong Stock Exchange also marked the 23rd company that has completed a "secondary listing."
Pan Qing told reporters, "Among the more than 200 Chinese concept stocks, Noah is the 23rd, and there are many companies lining up. All companies hope to promote the 'secondary listing' as soon as possible. As of now, 2024 April 2019 will be the deadline for the SEC to start a three-year delisting evaluation of the relevant listed companies. According to the "Accelerated HFCAA" Act, it may also be advanced one year. Remain listed."
In fact, according to interviews with reporters, compared with last year and the first half of this year, more foreign institutions are more optimistic about the possibility of Chinese concept stocks retaining their U.S. listing status.
"Secondary listing" is more like a channel to diversify risks and expand customer structure.
Pan Qing mentioned that due to the disturbance of the previous delisting risk, the risk appetite of international investors for Chinese stocks has dropped sharply, causing the company's stock price to seriously deviate from the fundamentals.
"Secondary listing" can spread risk and expand more Asian investors familiar with Chinese companies.
Landlord Ming, head of UBS Global Financial Markets China, previously told reporters that nearly 100 Chinese concept stocks have been included in the "pre-delisting list" so far this year, and how to resolve differences in future audit papers is still the key.
However, he believes that the current concerns are eased on the edge, "Maybe the probability that the market believes that the delisting problem of Chinese concept stocks can be solved has risen to 30%, but I think the actual probability is higher, and more Chinese concept stocks may still remain in the end. The status of the US listing, once this expectation becomes more and more clear, it cannot be ruled out that the follow-up market will still have upward momentum.
In his view, related Internet companies still play a key role in China's economy and employment.
At the same time, the US has a low threshold for listing and good liquidity, making it an ideal place for listing and financing for some Chinese companies (especially those with high growth but not yet making a profit).
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Overseas listing activities of Chinese companies are gradually picking up
In terms of "going out", the overseas listing activities of Chinese enterprises are also picking up.
On April 29th, the Politburo meeting was held, and both economic expectations and risk appetite were raised. The meeting clearly proposed "the introduction of specific measures to support the healthy development of the platform economy." close to the goal.
In addition, the regulators also expressed support for the cross-border listing of enterprises.
Many lawyers engaged in capital market business told reporters that with the recent surge in business, many companies hope to seize the exposure period of cross-border listing.
A news in late June further boosted market confidence.
On June 29, Manbang’s official Weibo announced that in the past year, the company has cooperated with the national network security review seriously, taken the security problems found in the review seriously, and carried out comprehensive rectification.
With the approval of the Cyber Security Review Office, the registration of new users of "Yunman" and "Truck Gang" will be resumed from now on; on the same day, BOSS Zhipin also announced that the registration of new users of "BOSS Zhipin" will be resumed from now on.
"In the past two years or so, these are the changes that we, as Chinese lawyers, have been facing with listed companies and clients and investors of companies to be listed." Li Qin told reporters, "Since the middle of last year, a large number of companies have taken the initiative to suspend business trips. The U.S. Securities and Exchange Commission has also temporarily suspended the review of listing applications for companies with VIE structures in the U.S. stock market. The performance of Chinese concept stocks in the U.S. and Hong Kong capital markets has entered a relatively sluggish period.”
Li Qin said: "Judging from the overseas IPOs we have participated in, we have also felt the attention of the securities regulators in the United States and Hong Kong on domestic regulatory changes. For example, Hong Kong has required Chinese lawyers to review a series of Chinese lawyers on almost every project this year. In terms of listing in the United States, since the "Cyber Security Review Measures" came into effect in February this year, companies listed in the United States that fall within the scope of supervision must first apply for a cyber security review."
Europe emerges as new cross-border listing destination
In addition to Hong Kong and the United States, Europe has also become a popular option for cross-border listing of Chinese companies.
On July 14, 2022, Mingyang Intelligent announced the issuance of Global Depository Receipts (GDR) and listed it on the London Stock Exchange (hereinafter referred to as "London Stock Exchange"). Mingyang Intelligent also became the first successful case after the new GDR regulations.
In addition, a number of A-share listed companies have recently applied to issue GDRs on the London Stock Exchange and the Swiss Stock Exchange (hereinafter referred to as "Swiss Exchange"), actively expanding financing channels.
In June, drugmaker Joincare was the latest company to announce plans to list on the Swiss stock exchange.
According to public information, there are currently 8 A-share listed companies that have issued “Zhongruitong” announcements. The seven companies Tansu and GEM also announced earlier that they will be listed on the Swiss Stock Exchange.
"Most of these companies are concentrated in the manufacturing industry. You may think that European countries such as Switzerland and Germany are better at the manufacturing or pharmaceutical industry. I believe that in the future, it will expand to more industries, such as some innovative or advanced companies. China issues GDR. The industry distribution will also be more diversified." Sun Lijun, co-head of the global investment banking department of UBS Securities, told reporters recently.
UBS Securities participated in 3 GDR issuances in 2020 as joint global coordinator.
A reporter from China Business News has previously reported that the revised Shanghai-London Stock Connect rules have opened up many European exchanges, and more and more Chinese-funded enterprises have begun to pay attention to the financing opportunities of issuing GDRs in Europe.
It is believed that Switzerland's audit requirements are more relaxed than those of the United States, helping Chinese companies to overcome a major obstacle to overseas listings while complying with Chinese laws.
The deals currently in the pipeline are quite large, even more so by Swiss standards.
Guoxuan Hi-Tech reportedly plans to raise $1.6 billion, while its industry peer Ningbo Shanshan plans to raise up to $1 billion.
The biggest Swiss listing last year was PolyPeptide, which raised CHF848 million.
In 2021, Swiss companies raised just CHF 3.7 billion ($3.8 billion) in total through public offerings.