Chinese companies reconsider U.S. IPO, look to Hong Kong
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What do a fitness app, AI-enabled matchmaking, and 3D modeling software have in common? The Chinese companies behind each — Keep, Soul, and Kujiale — were all geared up for a U.S. IPO, but then plans changed:
- Keep and Kujiale had planned to raise $500 million each in U.S. markets, but are now considering a Hong Kong listing instead.
- Soul also wants to list in Hong Kong, and has gone further than the other two companies, formally withdrawing its Nasdaq application in June.
The context: The three firms join a half-dozen other Chinese companies, including the hit audio-sharing app Ximalaya and Pinterest-like Xiaohongshu, who have been caught in the midst of U.S.-China tensions and are taking matters into their own hands.
- From the U.S. side, Chinese ADRs have been threatened with a mass delisting by 2024 unless they comply with U.S. audit rules — which they can’t, due to Chinese restrictions.
- From the Chinese side, Didi which listed in New York in June was punished for potentially moving sensitive data out of China, and such actions will only get worse in light of new data security laws.
The takeaway: This trend is bound to continue, whether Chinese companies leave U.S. markets willingly or not. Investors have the most to lose: if ADRs are delisted, shareholders will probably scramble to unload their stakes at whatever price the market will buy them.
