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Wednesday, June 10, 2020, 14:02
Mainland companies put US listing plans on ice
By Reuters
Wednesday, June 10, 2020, 14:02 By Reuters

The New York Stock Exchange reopens on May, 26, 2020. (PHOTO / XINHUA)

SHANGHAI/HONGKONG - Chinese mainland companies are putting off plans for US listings due to tensions between the world’s top two economies, lawyers, bankers, accountants and regulators involved in what has been a major capital-raising route told Reuters.

The drop in interest, especially from those in the early stages of planning, is the result of a proposed US legislation that would make it harder for some mainland firms to debut in America and mounting scrutiny

The drop in interest, especially from those in the early stages of planning, is the result of a proposed US legislation that would make it harder for some mainland firms to debut in America and mounting regulatory scrutiny.

“We have seen clients putting their US IPO plans on hold for now,” said Stephen Chan, a partner at law firm Dechert LLP in the Hong Kong special administrative region. “The underlying reason for the slowdown is the relationship between the US and China,” he added.

ALSO READ: US-listed mainland tech giants ‘moving back to HK’

“If tensions between the two nations remain, we would expect the slowdown to continue,” Chan said.

Mainland groups have raised US$1.67 billion via initial public offerings in New York this year and are looking to raise about half billion more on US exchanges, Dealogic data shows.

In 2019, they raised US$3.5 billion.

Enquiries about US listings have halved this year at one of the big four accounting firms in the mainland versus 2019 levels, a senior auditor from the firm said.

ALSO READ: Li: Mainland firms to make beeline for HK second listing

Many companies that reported plans for US listings to the mainland’s securities regulator, marking an early stage in the process, are now targeting exchanges nearer to home, said a person close to the regulator.The China Securities Regulatory Commission did not respond to requests for comment, while the US Securities and Exchange Commission declined to comment.

Listings take at the minimum several months to arrange, involving appointing advisers, preparing a prospectus and obtaining regulatory approvals. The further along the path a company is, the less likely it is to change plans.

Mainland firms accounted for about a third, or some US$279 billion, of funds raised globally via IPOs in the past five years. About half of that was overseas, mostly through New York and Hong Kong floats.

There are more than 550 Chinese firms listed on US stock exchanges. Mainland firms often choose New York for floats given its prestige and international investor base.

READ MORE: HK may become a magnet for US-listed mainland companies

US Senate has passed legislation that could ban many Chinese companies from listing shares on US exchanges or raising money from US investors without adhering to the US government's regulatory and audit standards.

“For US investors, it will mean fewer listings and it will be harder to capture the benefits of growth in China,” said John Ott, partner with Bain & Company and a leader with its Greater China financial services practice.

US-listed Chinese firms have begun disclosing the risk of an “adverse impact” on their shares due to tighter regulations.Kingsoft Cloud Holdings Ltd KC warned efforts to increase US regulatory access to audit information “could cause investor uncertainty for affected issuers, including us”.

NetEase and JD.com also warned of similar risks in their recent filings with the Hong Kong stock exchange for secondary listings in the city.


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