Actionable Ideas for Companies and Sponsors
Increasing IPO Activity from Chinese Companies in Both the U.S. and Hong Kong
Notwithstanding the U.S. legislative discussions currently taking place regarding listing standards for Chinese companies contemplating U.S. listings, we believe there will continue to be a strong level of IPO issuance in the U.S. by Chinese companies, particularly in the technology and healthcare sectors. The U.S. IPO market remains attractive for Chinese companies for a number of reasons including greater liquidity, more flexible listing standards (HK requires a minimum free float size, U.S. has no minimum size), and for technology companies, a wider range of accepted valuation methodologies, including forward revenue multiples.
In 2020, 10 Chinese companies have completed U.S. IPOs, representing over 20% of the U.S. IPO market excluding SPAC issuance, which is the highest percentage of U.S. IPO issuance since 2010, and technology and healthcare have been the two most active sectors. In June, Jefferies acted as an active bookrunner on two U.S. IPOs for Chinese companies -- Legend Biotech’s $487 million NASDAQ IPO (healthcare) and DaDa Nexus’ $320 million NASDAQ IPO (technology).
There is also an increasing trend for Chinese ADRs listed in the U.S. to complete secondary listings in Hong Kong. We believe this trend will continue as the Hong Kong Exchange is encouraging secondary listings for Chinese corporates with ADRs traded in the U.S. to be eligible for listing in Hong Kong, and has allowed Hong Kong listings for Chinese companies with super voting rights. For example, in June, JD.com (where Jefferies acted as a Joint Global Coordinator) completed its $3.9 billion Hong Kong IPO listing, having previously completed its U.S. IPO in 2014.