Chinese firms are pricing their U.S. IPOs above range, a sign of strong demand

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Published: June 29, 2020 11:00 AM

The strong appetite for these deals ends a more than one-year hiatus for Chinese firms pricing U.S. listings above their ranges.

 U.S. IPOs, U.S. capital markets, Chinese companies, U.S. listings, initial public offerings, startup,Four Chinese companies have priced their initial public offerings above their ranges, a sign of strong demand.

Bloomberg: Investors seem to be brushing off the headwinds for Chinese companies looking to list in the U.S.

Rising tensions between the U.S. and China as well as the spectacular downfall of a high-profile Chinese startup amid allegations of accounting fraud had clouded the outlook for companies from the Asian country looking to list in New York. But in the past month, four Chinese companies have priced their initial public offerings above their ranges, a sign of strong demand.

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The latest was Agora Inc., a developer of real-time video and voice communications software, which raised $350 million after pricing its U.S. IPO at $20 per share, $2 above the upper half of its range. Biotech firms Genetron Holdings Ltd, Burning Rock Biotech Ltd. and Legend Biotech Corp — a spinoff from Hong Kong-listed Genscript Biotech Corp. — also priced their IPOs above their indicative ranges.

The strong appetite for these deals ends a more than one-year hiatus for Chinese firms pricing U.S. listings above their ranges, data compiled by Bloomberg show. The last company to price higher than expected was ATIF Holdings Ltd. in May 2019, which has since dropped 62% from that price.

Last year was notable for reduced deal sizes and poor performance among Chinese firms listing in the U.S. as investor appetite for the companies waned. Of the 33 companies from China that listed in the U.S., 14 had to cut their deal size, Bloomberg-compiled data show. Large investment banks began to scale back their work on some of these IPOs, worried about reputational risks and reduced fees.

After Starbucks-challenger Luckin Coffee Inc. plunged in April when it revealed an internal investigation into the fabrication of hundreds of millions of dollars of sales, the sentiment around Chinese companies became even less positive. On top of that, relations between the U.S. and China have been deteriorating sharply and threatening to affect Chinese companies’ access to the deep U.S. capital markets.

The recent above-range pricings can partly be attributed to a widespread boom in demand for health-care and biotech companies, which are riding a peak of investor interest globally. Genetron also boosted the number of shares it sold in its IPO — it is rare to see a company price above the range and sell more shares — although judging by its 16% drop, it may have pushed the envelope too hard. Other Chinese firms to have completed successful U.S. IPOs since the Luckin scandal are in different sectors than the former high-flying startup, be it cloud computing or online delivery, suggesting investors are open to select companies.

UPCOMING LISTINGS

Shenzhen Hepalink Pharmaceutical Group
Hong Kong exchange
Size up to $585m
Books close June 30, trading July 8
Goldman Sachs, Morgan Stanley

Redsun Services Group
Hong Kong exchange
Size up to $55.5m
Books close June 30, trading July 7
ABC International

Immunotech Biopharm
Hong Kong exchange
Size up to $142m
Pricing July 3, listing July 10
CCB International, Guosen Securities

Sri Trang Gloves
Thailand stock exchange
Size $481m
Subscription period from June 23-June 25
Finansa

China Bohai Bank
Hong Kong exchange
Size about $2b
Pre-marketing from June 24
CCBI, Haitong, ABC International, CLSA

Smoore International Holdings
Hong Kong exchange
Size at least $800m
Pre-marketing from June 15
CLSA

Zhenro Services Group
Hong Kong exchange
Pre-marketing from June 15
CCB International, BNP Paribas

Greentown Management
Hong Kong exchange
Pre-marketing from June 19
Credit Suisse, Deutsche Bank

Ocumension Therapeutics
Hong Kong exchange
Pre-marketing from June 22
Morgan Stanley, Goldman Sachs

Agora
Nasdaq
Size $350m
Listing June 26
Morgan Stanley, Bank of America

Ebang International
Nasdaq
Size up to $126 million
Pricing on June 25
AMTD, Loop Capital Markets, Prime Number Capital

DoubleDown Interactive
Nasdaq
Size up to $209m
Pricing June 30
JPMorgan, Bank of America

SK Biopharmaceuticals
Korea stock exchange
Size $793m
Listing around July 2
NH Investment & Securities, Citi, Morgan Stanley

Hygeia Healthcare Holdings Co.
Hong Kong exchange
Size $286m
Listing June 29
Morgan Stanley, Haitong

Kangji Medical Holdings Ltd.
Hong Kong exchange
Size $404m
Trading June 29
Goldman Sachs, Citic Securities, Bank of America

More ECM situations we are following:

  • Chinese software company Agora Inc. has priced its U.S. initial public offering at $20 per share, above its indicative price range, it said in a statement
  • Kangji Medical says Hong Kong IPO retail offer 989x covered
  • Hygeia Healthcare says Hong Kong IPO retail offer 608.6x covered
  • Indonesian publicly listed firms are turning their sights to rights offers and private share placements to generate fresh funds as debt funding becomes harder to come by due to the economic devastation from the coronavirus.

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