IPOs: China-Concept NY Listings Shrivel in 2015

Bottom line: New York has lost its appeal for listings by smaller Chinese Internet companies, but should remain attractive for sector leaders like Didi Kuaidi and Meituan-Dianping.

Chinese NY IPOs shrink sharply in 2015

China’s imminent resumption of IPOs after a 4-month pause seems like a good opportunity to review what’s shaping up as the year of the “reverse IPO” in New York by Chinese companies. Market watchers will know that I’m talking about this year’s record wave of privatization bids by US-listed Chinese firms, which saw around 3 dozen companies announce plans to de-list from New York during the year with an eye to re-listing back in China.

That’s not to say that no Chinese companies listed in New York this year, and I was able to track down at least 4 that made such offers. But those 4 collectively raised a paltry $200 million, or just a tiny fraction of the nearly $30 billion that Chinese companies raised in a record year for New York IPOs in 2014.

This kind of sentiment swing is relatively common in fickle financial markets, though the rapid change in this case is somewhat surprising. The biggest New York IPO by a Chinese company came in September 2014, when e-commerce giant Alibaba (NYSE: BABA) raised $25 billion in what has also become the world’s biggest-ever IPO.

Nothing has really changed in New York since then, and US investors continue to closely follow top Chinese names like Alibaba and Baidu (NYSE: BIDU). But while those stocks are getting lots of attention, the same isn’t true for the many smaller companies with market values under $1 billion. Those companies make up the vast majority of those now de-listing from New York, and many are eyeing a growing number of re-listing options in their home China market.

My search of the archives reveals that at least 4 Chinese companies listed in the US this year, 3 on the Nasdaq and one on the New York Stock Exchange. Those included web designer Baozun (Nasdaq: BZUN); group buying site Wowo (Nasdaq: WOWO), also known as 55Tuan; real estate services site Jupai (NYSE: JP); and education services provider Hailiang (Nasdaq HLG). Of the four, the largest was Alibaba-backed Baozun, which raised around $100 million.

Somewhat coincidentally, 3 of the 4 companies priced their IPO shares at $10 apiece, with only Hailiang different at $7. Since then, Wowo, Baozun and Jupai are all down, losing 30 percent, 12 percent and 3 percent of their value, respectively, following their spring offerings. Only Hailiang has risen, up 33 percent from its July IPO, though even at its current price it still trades at quite a low valuation.

Thin Pipeline

The pipeline for new US IPOs by Chinese companies also looks relatively thin, with just a couple of solar companies reportedly working on such deals that could come to market by year end. Both of those would come from builders of solar power plants, including one from the plant-building unit of panel maker Canadian Solar (Nasdaq: CSIQ) and the other by Solar Power Inc.

The trickle of new offerings contrasts sharply with last year, when Alibaba led a flood of New York IPOs that saw other major names like the Twitter-like Weibo (Nasdaq: WB) and e-commerce giant JD.com (Nasdaq: JD) make major new New York listings. Instead, this year has seen far more companies move in the other direction with privatization bids, led by multibillion-dollar buyout offers for security software specialist Qihoo 360 (NYSE: QIHU) and hotel operator Homeinns (Nasdaq: HMIN).

All of that raises the question of what’s ahead for 2016, and whether New York will ever regain its popularity for offshore Chinese listings. The answer to the latter question is probably “no”, since many smaller Chinese companies can now choose from a growing number of domestic boards in China targeting high-growth private companies. But New York will still remain an attractive choice for certain sectors like solar, and may also be a strong choice for mega offerings by sector leaders like group buying giant Meituan-Dianping and car services leader Didi Kuaidi.

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