The number of U.S. IPOs by Chinese companies increased in March as several of them hurried to set up offshore listings before rules that will complicate the process went into effect; yet, several of them received a muted response from the markets.
Compared to just four in the previous two months, seven Chinese companies, including Chanson International and Hongli Group, have made public offerings in March to generate a total of $82.3 million.
Even if the figures are not large, the spike is notable because only six mainland Chinese businesses launched U.S. initial public offerings in 2022, which was hampered by Sino-U.S. tensions and, in particular, by tight regulatory scrutiny on both sides.
The goal of China’s new regulations, which were announced in February and will go into effect on March 31, is to reopen the door for international offerings, which all but vanished after regulatory crackdowns that started in the middle of 2021.
They also impose an approval system on a previously unregulated market with a focus on data protection and national security, which is why some businesses are in a rush to enter the market before them.
Given the uncertainty created by the new offshore listing guidelines, there has been an apparent increase in Chinese companies looking to list in the United States this month, according to Stephanie Hu, head of Asia investment banking at EF Hutton, which served as book runner for Chanson’s IPO.
The new system needs materials to be submitted to the China Securities Regulatory Commission (CSRC) and approval from the appropriate government agencies.
Mandy Zhu, head of China Global Banking at UBS, stated that this will “eliminate regulatory uncertainties” and standardize Chinese enterprises’ overseas listings.
It will probably take a lot of time as well.
The bakery brand Chanson International, which made its Nasdaq debut on Thursday, was one of the new listings.
If we list before March 31, we do not need approval from connected departments of China, according to chairman and CEO Gang Li, who spoke to reporters.
But, “we will obey Chinese laws and, if necessary, cooperate on all follow-up work.”
A reminder that markets shaken by financial concerns are not in the mood for small Chinese listings, the listing, which garnered a meager $13.6 million, plummeted sharply on its first day of trade and closed nearly 40% below the issue price.
Hongli Group, a producer of steel, YanGuFang International Group, a producer of food grains, and Jin Medical International, a producer of wheelchairs, all listed in the United States earlier that week. All three companies received muted investor responses.
According to reporters, London is actively seeking out additional China listings.
