Banks are reportedly scrambling to move IPOs of Chinese companies from New York to Hong Kong after regulators cracked down on overseas listings

Hong Kong Skyline
  • Regulators’ harsh response to Didi’s IPO has forced the 20 or so Chinese companies that had plans to go public in New York to re-evaluate, according to a Financial Times report.
  • 34 Chinese firms raised $12.4 billion in New York capital markets in the first half of this year, according to Dealogic data.
  • Data-oriented companies have been most eager to plan for Hong Kong listings, in large part because the mainland government’s crackdown has centered around data privacy.
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Investment banks are scrambling to divert Chinese IPOs away from the US market and into Hong Kong as the government’s crackdown on foreign listings spreads, according to a Financial Times report.

Regulators’ harsh response to China’s last major foreign IPO, that of Didi Chuxing, has forced the 20 or so Chinese companies that had plans to go public in New York to re-evaluate.

Bankers who spoke with the FT said clients are exploring moving listings to Hong Kong but are also wary of the hurdles. Hong Kong-specific regulatory requirements and the inherent uncertainty of going first were among the leading concerns.

“We’re speaking to everyone about it,” one Hong Kong-based investment banker told the FT. “If you want to do a deal this year, at best you’ll be delayed until 2022 and at worst you won’t be able to do it.”

The move toward Hong Kong is an abrupt shift for corporate China. 34 Chinese firms raised $12.4 billion in New York capital markets in the first half of this year, according to Dealogic data previously reported by the FT.

In the wake of Didi’s NYSE debut, China’s cybersecurity ministry alleged the company had violated privacy laws and launched an investigation into its data practices. The action took Didi’s stock price down sharply the day of the announcement.

Data-oriented companies have been most eager to plan for Hong Kong listings, in large part because the mainland government’s crackdown has centered around data privacy. Moving to Hong Kong could abate some of that scrutiny, two bankers told the FT.

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Nearly 600 IPOs rolled out globally in the second quarter, dominated by traditional listings while SPAC activity cooled, says EY

Didi Chuxing's D1 at the launch event in Beijing on November 16, 2020
Didi Global shares went public in the US in June.

  • 597 IPOs came online in the second quarter of 2021, the busiest quarter for that market in 20 years, said EY.
  • There were 59 SPAC IPOs during the period, a slowdown from 299 during the first quarter.
  • But SPAC activity is poised to pick up again in the second half of 2021.
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The second quarter of 2021 marked the most active for companies entering the public markets worldwide in more than two decades, with traditional IPOs leading the way while the market for SPACs slowed in the US, according to figures from consulting firm EY.

Didi Global as the biggest IPO by proceeds between April and June as the China-based ride-hailing service pulled in $4.4 billion as it launched on Nasdaq. Didi was one of the 597 IPOs that went live last quarter, and among the companies that went through a traditional IPO process. Such firms had the most IPOs, outstripping SPACs, or special purpose acquisition companies, the market for which boomed earlier this year and in 2020.

SPACs are so-called “blank check” firms that go public with only cash on their balance sheet. Their aim is to merge with or acquire a private company, allowing that business to skip the traditional IPO process to debut.

EY said there were 59 SPAC IPOs in the US that raised $12 billion in proceeds in the second quarter, a cooldown from the first quarter when there were 299 SPAC IPOs that raised $96.9 billion.

SPAC formation slowed in the second quarter in part on accounting guidance from the US Securities and Exchange Commission for SPAC-related companies, said EY.

“The guidance indicated that in some cases, SPACs should account for the warrants as liabilities rather than as equity. As a result, many SPACs had to restate their financial statements, a process that should have been completed by June,” the consultancy said in its report.

But activity in the SPAC IPO space should pick up in the third quarter, with nearly 300 SPACs on file that haven’t yet priced, indicating there are SPACs rushing to find suitable targets, said EY. “High-quality target companies could have stronger bargaining power that will enable them to secure more favorable terms,” it said.

Overall, the IPO market has been buoyed by ‘ample” liquidity in the financial systems stemming partly from ongoing government stimulus programs, as well as by a surge in equity markets and speculative and opportunistic transactions, EY said.

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Robinhood has filed confidentially for a US IPO, new report says

Robinhood on cellphone

Robinhood Markets confidentially filed for an initial public offering with the US Securities and Exchange Commission, Bloomberg first reported on Tuesday.

Robinhood, the trading app popular among retail investors, selected Nasdaq as the venue for its listing, according to Bloomberg. Robinhood is also said to be keeping its listing plans open to change. It’s been eyeing an IPO since as early as 2018. The company had more than 13 million users at the end of 2020.

The app’s rapid rise to prominence peaked during the GameStop short-squeeze saga in late January as an army of Reddit day traders sparred with hedge funds to push shares of the video-game retailer to dizzying highs.

Robinhood achieved an $11.7 billion valuation in a funding round last year. It also raised financing this year that will convert to equity upon the completion of an IPO, Bloomberg reported in February. A first tranche will convert at the lower of a $30 billion valuation or a 30% discount to the IPO, with the second at the lower of the 30% IPO discount or a $33 billion valuation, according to Bloomberg.

Robinhood hired Goldman Sachs in December to lead its IPO.

Read more: Hedge funds are ramping up bets against Chamath Palihapitiya’s SPACs and have already taken home $40 million this year. Here’s a detailed look at the wagers they’re making.

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‘It’s silly season’: Airbnb and DoorDash’s IPO rallies signal return of dot-com-era greed, strategists say

Airbnb IPO
The Nasdaq digital billboard in Times Square in New York on December 10.

  • Airbnb’s and DoorDash’s massive debut rallies suggest the IPO market is getting ahead of itself, top strategists said Thursday.
  • Airbnb spiked 115% when it began trading publicly for the first time on Thursday. DoorDash closed 86% higher in its Wednesday debut.
  • The first-day climbs revealed “euphoria and greed” last seen in the market during the dot-com bubble of the late 1990s, Paul Schatz, the president and chief investment officer of Heritage Capital, said.
  • “It’s silly season,” and investors need to differentiate between “a great company and a great price or value,” Rich Steinberg, the chief market strategist at the Colony Group, told Business Insider.
  •  Visit the Business Insider homepage for more stories.

Airbnb’s and DoorDash’s colossal post-IPO pops reveal unsustainable euphoria in the stock market, top strategists said.

Some of the year’s biggest initial public offerings took place this week, adding to an already record year for market debuts. DoorDash soared 86% when it began trading on Wednesday after raising $3.2 billion through its offering the day prior. Airbnb leaped 115% when it began trading Thursday afternoon, pushing its market cap above $100 billion and raising $3.5 billion.

The first-day rallies, while extraordinary, show “euphoria and greed” that’s likely not been seen in the stock market since the dot-com bubble of the late 1990s, Paul Schatz, the president and chief investment officer of Heritage Capital, said. Many investors are rushing to the new stocks, wanting to get in at any price, but such massive IPO bounces usually give way to similarly outsize losses, he added. 

“It’s silly season,” Rich Steinberg, the chief market strategist of the Colony Group, told Business Insider. “Investors need to distinguish the difference between a great company and a great price or value.”

Read more: 2 investment chiefs at John Hancock’s $692 billion investing arm say the post-COVID recovery might disappoint in 2021 – but investors can profit with these 3 strategies

Both strategists attributed some of that euphoria to the near-zero interest rates expected to stay put over the next three years. The Federal Reserve’s plan to hold rates at record lows leaves investors with fewer places to put their money, as the policy suppressed Treasury yields early in the pandemic. The Fed’s backstop of the corporate credit market placed similar pressure on bond yields.

The combination of near-zero interest rates, a “tsunami of liquidity,” and hundreds of billions in unallocated investor cash fueled the two buying sprees, Schatz said.

The week’s booms might be only the start. Investors could face “complete and utter mania” across the IPO market in the first half of 2021 as more firms look to tap the market while demand remains strong, the Heritage Capital president said. Investors should avoid trying to time such volatile debuts and instead be patient until stock prices better reflect firms’ fundamentals, he added.

“Being the last guy buying the opening of a hot IPO, at the height of this speculative excess in some of these names, typically does not end well,” Steinberg said. 

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