American markets are great again for Chinese IPOs

Yunji

09/05/2019 14:07

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are her own.)
    By Gina Chon
    SAN FRANCISCO, May 9 (Reuters Breakingviews) - There’s an
exception in the fight over tariffs and more between Washington
and Beijing: U.S. listings of Chinese companies. A near-record
number of Chinese firms went public on U.S. exchanges in 2018.
Luckin Coffee is among those continuing the trend this year. It
contrasts with sharp drops in Chinese investment in the United
States amid a trade war and other strains.
    The wave of Chinese companies buying U.S. firms has slowed
to a trickle recently, with investment from the People’s
Republic down 84 percent in 2018, according to research firm
Rhodium Group. Trade tensions and tougher U.S. national security
reviews have dampened the mood.
    It’s a different story for U.S. exchanges. Chinese firms
have made up about 16 percent of initial public offerings on
American exchanges so far in 2019, according to Refinitiv. That
is roughly in line with last year, when 33 Chinese companies
listed on the Nasdaq or New York Stock Exchange, the
second-highest number ever. 
    Starbucks  SBUX.O  rival Luckin Coffee will be one of the
most high-profile debuts of 2019. On Monday, it said it plans to
raise as much as $587 million on a valuation of about $3.9
billion. Video-game streaming platform Douyu is also on deck,
while shares in e-commerce firm Yunji have risen about 20
percent since its listing earlier this month.
    Stricter mainland rules requiring issuers to have at least
three years of profit and endure a lengthy approvals process
have helped push listings to America. Like U.S. unicorns, many
Chinese ones are losing money. Luckin had a net loss of $475
million in 2018, while Yunji  YJ.O  racked up $8 million in red
ink. The depth and high valuations of the U.S. market have also
lured listings from tech giants like Alibaba  BABA.N  and
Tencent  0700.HK .
    China is eager to win some of that business back. As early
as next month, the Shanghai Stock Exchange is expected to launch
a Science & Technology Innovation board that will allow
unprofitable companies to list as long as they meet minimum
revenue and other standards. A registration-based system should
also speed up the process.
    Still, there is skepticism it will work given past failures.
U.S. exchanges offer stronger brands and access to more
institutional investors. China's capital controls are another
incentive to list in New York. American markets are great again
for Chinese IPOs.
    On Twitter https://twitter.com/GinaChon

    CONTEXT NEWS 
    - Chinese companies listing on U.S. stock exchanges have
made up about 16 percent of 43 initial public offerings this
year, according to Refinitiv data as of May 6. That is in line
with figures in 2018, when the most Chinese firms listed in
America since 2010. Last year, 33 Chinese companies went public
on U.S. exchanges out of a total of 199 offerings.
    - One of the latest companies to make that move is
Beijing-based Luckin Coffee, which said on May 6 that it plans
to issue 30 million American depositary shares at between $15
and $17 each. That would raise about $510 million at the top of
the price range, implying a valuation of about $3.9 billion.
Underwriters have the option to increase the offering by 4.5
million shares, which would boost the total raised to $587
million.
    - Separately, Chinese Vice Premier Liu He plans to meet with
officials of the administration of President Donald Trump on May
9 and 10 in Washington. U.S. Trade Representative Robert
Lighthizer said on May 6 that China had backpedaled on certain
commitments in the trade negotiations, prompting the White House
to announce it would move forward with a threatened increase in
tariffs on $200 billion worth of Chinese goods. The levy would
increase from the current 10 percent to 25 percent on May 10.
    - For previous columns by the author, Reuters customers can
click on  CHON/ 
    - SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS http://bit.ly/BVsubscribe
    

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Starbucks' China rival Luckin seeks to raise up to $586.5 mln in
IPO     urn:newsml:reuters.com:*:nL3N22I2Y5
BREAKINGVIEWS- China’s Luckin Coffee roasts a rich IPO   
 urn:newsml:reuters.com:*:nL3N22J0MG
BREAKINGVIEWS-Breakdown: Shanghai stock venue shows promise   
 urn:newsml:reuters.com:*:nL3N21505L
BREAKINGVIEWS-Pinduoduo offers New York a Shanghai bargain   
 urn:newsml:reuters.com:*:nL3N2110BD
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Editing by Tom Buerkle and Amanda Gomez)
 ((gina.chon@thomsonreuters.com; Reuters Messaging:
gina.chon.thomsonreuters.com@reuters.net))