Chinese fundraisings in limbo as IPOs scrutinised at home and abroad
The Hindu
Chinese companies face a capital drought due to stricter IPO rules, forcing many to abandon listing plans domestically and overseas.
Chinese companies are staring at the prospects of a drought of new equity capital as tougher domestic IPO rules and challenges in listing overseas severely curb their fundraisings, putting at risk the floundering economy’s recovery.
China’s securities watchdog has sharply tightened scrutiny of IPOs this year, leading to companies scrapping domestic listing plans in droves, with some turning to offshore markets such as Hong Kong and New York.
However, sharper scrutiny of IPO hopefuls in the U.S. amid geopolitical tensions and a weaker Hong Kong market will stymie offshore listings for many, highlighted by Alibaba’s move this week to ditch the Hong Kong IPO plan of its logistics unit.
During January-March 2024, money raised via China IPOs plunged two-thirds from a year ago to just $2.4 billion, the smallest quarterly fundraising since the fourth quarter of 2018, and down 82% from a year earlier, preliminary LSEG data showed.
The sudden freeze of an IPO market that was the world’s biggest in 2023 and 2022 comes after the securities watchdog, under new chairman Wu Qing, vowed to step up scrutiny of listing candidates and crack down on any lapses.
The IPO tightening “would make it increasingly difficult for small companies to raise capital” and for private equity investment to exit, said Andrew Qian, CEO of Shanghai-based investment and advisory firm New Access Capital.
“IPOs in China will become scarce resources,” said Mr. Qian, who is now helping some companies list on Nasdaq instead.