Horrible Year for China IPOs in U.S. May Get Worse

(Bloomberg) --

For Chinese companies seeking a U.S. listing, 2019 has been a horrible year. With only two weeks left, it’s about to get worse.

Cloud fintech platform OneConnect Financial Technology Co., owned by Ping An Insurance (Group) Co. and backed by Softbank Group Corp., almost halved its planned U.S. IPO size, meaning the company is now likely to go public at a valuation that is less than half of what the Japanese tech investment giant paid in 2018.

OneConnect had planned to raise as much as $504 million at a valuation of about $4.4 billion to $5.2 billion. Its new price range and offer size imply a market capitalization of $3 billion to $3.3 billion before the IPO, according to Bloomberg calculations, less than half the $7.5 billion the company was valued at when Softbank invested in 2018.

Meanwhile Ucommune, the largest rival to WeWork in China, lost three banks that had been working on the deal -- Credit Suisse Group AG, Citigroup and Bank of America Corp. -- according to people familiar with the matter. All three banks declined to comment. An email to Ucommune seeking comment went unanswered.

In a year marked by several high profile IPO flops (see WeWork), investors have become more skeptical of valuations and have focused on profitable firms or those which have a clear path to profitability. That often means that larger, more familiar companies get more investor interest, bankers say. Chinese IPOs in the U.S. are typically smaller deals.

Ucommune filed overnight for a U.S. IPO and the banks’ names aren’t in the filing. Credit Suisse dropped off a number of U.S. IPOs this year, including those of bitcoin mining equipment maker Canaan Inc. and drone maker EHang Holdings Ltd.

One of the reasons behind the lower amount of funds raised via U.S. listings by Chinese companies is the poor performance of those offerings, which in turn has affected investor sentiment and forced many to cut the amount they seek to raise.

The 30 Chinese firms that raised $3.25 billion in total in U.S. IPOs this year have dropped by an average 25% from their offer prices, data compiled by Bloomberg show. Just six of them are trading above their IPO prices. In contrast, in the same period last year Chinese companies raised about $9 billion in U.S. IPOs and fell by an average 11% in their first year of trading.

Read More: Another Chinese Company Cuts Size of U.S. IPO

UPCOMING LISTINGS:

  • Poly Property Development
    • Hong Kong exchange
    • Size up to $598 million
    • Pricing Dec. 12, listing Dec. 19
    • GF Capital, Huatai Financial, ABC International
  • JS Global Lifestyle Company
    • Hong Kong exchange
    • Size $332 million
    • Listing Dec. 18
    • Credit Suisse, Morgan Stanley, ICBCI
  • Renrui Human Resources Technology
    • Hong Kong exchange
    • Size $129m
    • Listing Dec. 13
    • BNP Paribas
  • EHang Holdings Ltd
    • Nasdaq
    • Size $46.4 million
    • Morgan Stanley
  • Bangkok Commercial Asset Management
    • Thailand stock exchange
    • Size $869m
    • Listing Dec. 16
    • Trinity Securities, Kasikorn Securities, UBS
  • OneConnect Financial Technology
    • New York Stock Exchange
    • Size up to $260m
    • Pricing Dec. 12
    • Morgan Stanley, Goldman Sachs, JPMorgan, Ping An of China Securities
  • CABIO Biotech Wuhan
    • Shanghai Star board
    • Size $106m
    • Taking orders Dec. 10; listing TBA
    • Guotai Junan Securities

More ECM situations we are following:

  • WeLab Holdings Ltd., an online lender backed by billionaire Li Ka-shing, raised $156 million from investors including Alibaba Group Holding Ltd. and China Construction Bank Corp. in Greater China’s largest financial technology fundraising this year.
  • Bank of Guizhou plans to open books on Friday for a Hong Kong IPO of about $700m–$800m, IFR reported, citing unidentified people close to the deal.

SEE ALSO:

  • Asia ECM Weekly Agenda
  • IPO data
  • U.S. ECM Watch
  • EU ECM Watch
  • To receive the ECM Watch in your inbox daily, click the “subscribe” button at the top of this article

©2019 Bloomberg L.P.

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