Three of the largest Chinese tech giants have filed initial public offerings (IPOs) on the Hong Kong stock exchange in what is seen as a hedge against the trade war between China and the US.
Several major Chinese tech companies such as Alibaba, JD.com, and NetEase have filed their IPOs in Hong Kong as a precautionary measure against a US Senate bill. The proposed legislation might force Chinese companies to delist their stocks from American exchanges such as Nasdaq.
The bill still requires the approval of the US House of Representatives and US President Donald Trump. Yet, it has already gained bipartisan support overseas. Once the law passes, Chinese companies would need to ascertain and submit proof that their entities are not owned by the Chinese government. They would also be required to open their accounting books to the non-profit organization Public Company Accounting Oversight Board (PCAOB).
Alibaba originally planned to go public on the Hong Kong stock exchange last August. However, they postponed the plan due to escalating protests there. It finally completed its offering last November. Alibaba has also listed on the US stock exchange for five years.
The company also assured US investors that it would not delist its New York stock exchange shares. It claimed to be capable of complying with the upcoming regulatory demands. According to the company's chief financial officer (CFO) Maggie Wu, the company closely monitors the development of the bill. However, it remains unclear as to whether Alibaba would fully open its books to the PCAOB.
On the other hand, JD.com, Alibaba's strongest competitor in the Chinese e-commerce market, also went public in American exchanges during 2014. It recently filed a secondary offering at the New York stock exchange for 133 million USD on its ordinary shares. The offer includes 126.35 million USD-listed shares that are offered internationally, along with 6.65 million USD shares in Hong Kong. The Hong Kong listing would be similar to that listed with American exchanges.
The company's secondary offering could reach four billion USD and dilute its existing shares by five percent. It is also expected to update its listing by June 18, 2020, the same date for JD.com's 22nd anniversary and the final day of its annual "618" shopping holiday.
Finally, NetEase is also expected to raise about 2.8 billion USD with its new IPO. This move would dilute its existing shares by five percent. The shares would not be sold at a discount to its US-listed ones.
In 2001, NetEase was temporarily delisted from Nasdaq due to allegations of fraud and a missed annual report. However, it overcame the scrutiny and developed into a reliable company of China's gaming sector.
