Chinese Listings to Be? Beijing Official Sees a Way to Cooperate

The SEC wants audits? All they had to do was ask, says a top Chinese official.

Anna Vodopyanova
    Jun 18, 2020 3:00 PM  PT
Chinese Listings to Be? Beijing Official Sees a Way to Cooperate
author: Anna Vodopyanova   

Newly-listed Chinese ADSs are taking a wild ride Thursday, mirroring the unstable Sino-American political mess.

All those fears of delisting of China companies can ease now. So what if the U.S. is reviewing a bill to force all foreign firms under PCAOB auditing? "As long as the U.S. side is willing to solve the problem, we can definitely find a way for China and the U.S. to cooperate on audit regulation," a top securities regulatory official told Caixin Global in an interview this week. 

Actually, China Securities Regulatory Commission's Chairman Huiman Yi said, there was never a ban on providing audits to overseas regulators, the medium reported.

Lately, about 250 Chinese companies publicly traded in New York, as well as their investors, have had their share of worry. In May, following the downfall of the un-Luckin Coffee (Nasdaq: LK), the U.S. Senate has proposed a bill under which auditors of foreign companies trading in the U.S. would have to get inspected by the Public Company Accounting Oversight Board (PCAOB). It would also force the firms to disclose relations to the government. The bill has yet to be passed by the U.S. Congress, but it had already led to some understandable uncertainties and stock drops, since China's policy, grounded in national security concerns, has been not to allow books to leave the country.

In the few weeks since the regulatory move to protect U.S. investors took place, a number of Chinese and Hong Kong companies rushed to become publicly traded in New York even as others turned to other options.

On June 5, Dada Nexus Ltd. (Nasdaq: DADA) raised $320 million in an upsized float, priced at $16 per share. The company, a grocery delivery giant backed by (Nasdaq: JD) and Walmart (NYSE: WMT), closed today at $22.47 per ADS. In fact, just on Thursday, DADA shares skyrocketed nearly 12%, as JD celebrated its secondary IPO in Hong Kong today while enjoying the mid-year shopping spree festival.

On the same day, Legend Biotech Corp. (Nasdaq: LEGN), with operations in the United States, as well as in China, landed with $424 million in IPO proceeds – way above the expected target. The biotech company was spun-off of GenScript Biotech (HKEX: 1548) and is working with an affiliate of the medical giant Johnson & Johnson (NYSE: JNJ). LEGN stock on Thursday soared at $39.29 per ADS compared with the issue price of $23. It jumped 4.5% today.

Hong Kong-based uCloudlink Group Inc. (Nasdaq: USL) raised $36.2 million on June 10, priced at $18 per share. Early upon debut, UCL peaked at $24.77 per share, then slipped below issuance level. On Thursday, UCL stock closed at $16.33 per share. The company operates a marketplace for mobile data traffic sharing.

Last Friday, Burning Rock Biotech Ltd. (Nasdaq: BNR) raised $247.8 million in its upsized IPO and the concurrent private placement. Priced at $16.50 per American depositary share, today it closed $10 above that level. Market sentiment today sent BNR to soar 9% to $26.59 per share. The Guangzhou company develops next-generation sequencing-based cancer therapy selection tests.

Meanwhile, this Friday, June 19, Genetron Holdings Ltd. is set to lift off on the Nasdaq Global Market. The Beijing-based company, which provides precision oncology solutions, today upsized its offering by 3 million shares to 16 million ADSs total. At the top of its $11.50 to $13.50 price range, Genetron's IPO would come to $216 million. Underwriters on Genetron's deal, Credit Suisse Securities (USA) LLC, China International Capital Corp. Hong Kong Securities Ltd., BTIG LLC, and Canaccord Genuity LLC, may acquire an additional 2.4 million ADSs upon the IPO.

So, was this all just a misunderstanding? Investors would certainly like to think so.