After a dry spell in the formerly brisk market, Chinese startups are once again raising millions of dollars through listings on the American stock market. Hesai Group, a supplier of "lidar" technology for autonomous vehicles, was listed on the Nasdaq on Thursday. In their launch, shares increased by over 11%.
Only six China-based businesses had issued American depositary receipts in the United States as of the end of 2022. IPOs since the controversy surrounding Didi, according to Wind Information. One of these was the biotech firm LianBio, which according to the data raised $334.5 million in November 2021, the biggest sum since Didi's IPO.
In excess of original projections, the firm raised $190 million in its IPO, making it one of the largest listings since ride-hailing giant Didi raised $4.4 billion in its IPO in June 2021. Just days after Didi's public listing, Chinese regulators responded to the listing by ordering a cybersecurity examination of the company. The following year, the company was delisted.
However, as businesses get greater regulatory certainty, the dry spell in Chinese IPOs in the United States is beginning to fade. Internet platform operators with personal data of more than 1 million users must submit for a cybersecurity evaluation before they may list abroad, according to a new law that Chinese regulators have announced.
In order to inspect the audit work papers of Chinese companies listed in the U.S., the Public Company Accounting Oversight Board (PCAOB) in the United States reached an agreement with China's securities regulator and finance ministry last year. The PCAOB announced in mid-December that it had obtained "complete access," eliminating a short-term risk of forcing Chinese companies to delist from U.S. stock exchanges.
For the IPO, which raised $40.6 million, notable investment banks Citigroup, CICC, and CLSA were among the underwriters. Prospect Avenue Capital and Qiming Venture Partners were among QuantaSing's supporters. Qiming also provided support to Hesai and Structure Therapeutics, two additional Chinese businesses that released ADRs this year.
Drew Bernstein, co-chairman of audit firm Marcum Asia CPAs LLP, said on Thursday that more Chinese companies are starting to get ready for listings in the United States. His company is now dealing with around 50 companies, most of which are based in China. It's "probably the strongest pipeline our firm has had in its history," he said.
However, he anticipates that it will be some time before many IPOs return to the market, particularly given how challenging it is for people to obtain visas and leave and enter China.
