Zurich-based investment bank Credit Suisse has reportedly backed out as one of the sponsors for WeDoctor's upcoming initial public offering in Hong Kong. The bank's exit will open up a slot for other investment firms wishing to take part in the Tencent-backed company's IPO.
Hangzhou-based health tech firm WeDoctor is aiming to raise up to $800 million during its upcoming IPO. Apart from hiring Credit Suisse as its underwriter, the online health platform operator has also tasked JPMorgan and CMB International as its sponsors.
WeDoctor, founded by Jerry Liao in 2010 and heavily backed by Chinese tech firm Tencent, previously raised around $500 million during a private share sale in 2018. The startup is currently valued at around $5.5 billion and is in direct competition with Ping An Health Care and Technology, Health Link, and Good Doctor Online.
Credit Suisse's decision to drop out comes as one of its previously supported IPOs is being scrutinized for possible fraud. The bank previously sponsored the listing of China's Starbucks competitor Luckin Coffee back in May last year. The coffee chain operator is currently being investigated by regulators following the revelation of how its executives had deliberately altered its financial statements.
After the findings of its internal investigation were made public, Luckin Coffee's shares had tanked to an all-time low last week. The company's chief operating officer Jian Liu, along with other employees, was implicated in the scheme. All that were found to have been involved have since been suspended.
Liu reportedly inflated the company's sales numbers in three of the four quarters last year. This rendered the firm's 2019 financial statements unreliable, resulting in a loss of trust with its investors. Credit Suisse was involved in Luckin Coffee's listing at the NASDAQ last year. However, it isn't clear if it was aware or had detected the faked data during that time.
The scandal has managed to increase the reluctance of western investment banks to support Chinese firms during their IPOs. Experts have pointed out that this could cause banks to demand higher fees for putting their reputations on the line. Some banks could even end up refusing deals outright as a result.
More optimistic assessments of the situation have stated that the reluctance of western banks could open up new opportunities for Asian firms, which are likely to be more open to supporting domestic firms and their planned listings. Asian banks also have more access to local resources, allowing them to better asses a company's operations.
