Big-ticket IPOs to drum up investor interest
Bourses look to attract more listings by innovative companies from tech sector
A fresh batch of Chinese technology companies are seeking to raise funds through initial public offerings this year, with several mega deals on the horizon.
Industry experts said tech firms have a renewed appetite for IPOs at home and abroad, partly in order to enable their shareholders to cash out of investments.
iQiyi Inc, a video streaming unit of search engine giant Baidu Inc, filed for an IPO in New York worth up to $2.4 billion, according to a filing with the US Securities and Exchange Commission.
Meanwhile, Lufax, one of the mainland’s largest financial technology companies owned by Ping An Insurance (Group) Co, plans to list on the Hong Kong Stock Exchange in April, according to sources quoted by the South China Morning Post.
Another much-talked-about potential mega IPO is Xiaomi Corp. The smartphone maker is reportedly hoping for a valuation of about $200 billion.
Such deals would easily overshadow the full-year totals for 2017. According to Thomson Reuters, 88 Chinese tech firms raised a combined $7.6 billion worldwide last year.
This year could be a big year for tech IPOs, as investors are looking to cash out their investments and stock exchanges want to attract more new economy companies, an industry expert said.
Li Jian, a director of the central business development department at Deloitte China, said the number of IPO filings on the Chinese mainland and Hong Kong bourses this year is expected to be similar to the high levels of 2017.
IPOs are seen as a traditional method of fundraising, as well as enhancing a company’s reputation and its market influence, said Wu Hao, managing director of venture capital relationship management, at SPD Silicon Valley Bank.
But for companies in the science and innovation sector, IPOs are not always necessary, given the availability of rich capital from private equity and venture capital firms, Wu added.
One interesting phenomenon is that these tech firms are so keen on IPOs in order to create liquidity for existing shareholders.
IPOs are one of the two main strategies that entrepreneurs and venture capitalists use to exit deals. Mergers and acquisitions is the other.
“The earlier a startup was founded, the more urgent it is to file for an IPO as some investors have held shares for a long time,” Wu said.
In addition, stock exchanges around the world, including those in the Chinese mainland and Hong Kong, are realizing the significance of attracting companies in emerging sectors, he added.
“As the number of IPOready companies in traditional sectors is bound to decline, stock exchanges around the world need to attract more innovative companies,” he said.
Hong Kong is expected to see an increase in technology listings due to the strong performance of recently listed companies and government support, according to a report from global accounting firm Ernst & Young.