After Xiaomi, Alibaba to Delay its Mainland China CDR Offering

This is the second delay for the issuance of China depositary receipts (CDRs) - both of which came with no explanation.

CapitalWatch Staff
    Jul 02, 2018 3:54 PM  PT
After Xiaomi, Alibaba to Delay its Mainland China CDR Offering
author: CapitalWatch Staff   

Chinese e-commerce giant Alibaba Group Holding Ltd. (NYSE: BABA) plans to postpone its mainland share offering that was scheduled for July, people close to the deal told Tencent News. 

If this turns out to be true, it would be the second recent delay for the issuance of China depositary receipts (CDRs). 

Earlier this year, China's financial regulator published several rules for the issuance of a new type of security that would enable foreign-listed, fast-growing Chinese companies go back home to list on the mainland markets. Following the announcement, tech giant Baidu Inc. (Nasdaq: BIDU),  NetEase Inc. (Nasdaq: NTES), Alibaba Group Holding Ltd. (NYSE: BABA), Inc. (Nasdaq: JD), and Xiaomi Corp. have all publicly stated their intention to participate.

Contrary to the warm welcome at the beginning of the year, however, it appears the Chinese government is now being cautious. At a press conference last week of the China Securities Regulatory Commission (CSRC), the authority that handles the CDR application, a reporter commented that, "There is a rumor that if [the] Shanghai index goes below 3,000 points, [you] will not proceed with the CDR application."

The Commission denied the rumor and said it does not make any evaluation of market performance. The CDR application would proceed as usual, it said, without explaining the reasons for the delay of the CDRs.

The sponsor of Alibaba's issuing CDR is CITIC Securities, and the joint sponsor is CICC. 

Just two weeks ago, Xiaomi said in its announcement that it would submit an application to China's securities regulator to postpone the ongoing review of its China depository receipts offering application. Similarliy, it did not say when it would restart its CDR application process or why it was postponing the mainland offering.

Sources told Reuters the decision was mainly because of a dispute between the company and Chinese regulators over the valuation of its CDRs, but the company denied this.

Shortly after, CSRC said in a separate statement it would suspend the review of Xiaomi's CDR application.