From Baidu to Bilibili: why Chinese tech companies go back to listing "at home"
From Baidu to Bilibili
The will of the Beijing government to create its own Nasdaq and the pressure of the financial authorities in the United States open the way for secondary quotations in the motherland
(Photo: Vcg / Getty Images) The "counterexodus" continues from a on the other side of the Pacific by Chinese technology companies on the stock exchange: the latest to choose Hong Kong to launch a secondary listing are the search engine giant Baidu and Bilibili, the social platform for short videos. “When Baidu went public on Nasdaq, I said it would be just one of our stops. That Baidu would eventually return to China, because our roots are in China. Today, Baidu has finally returned home, ”President and CEO Robin Li said at a ceremony in Beijing.However, the reception on the markets has been lukewarm for the company, which among other things plans to enter the electric vehicle business. The stock trading was practically flat compared to the opening price (252.80 Hong Kong dollars, compared to the initial 252), leading to inflows of 3.1 billion US dollars. Meanwhile, shares were up 3.4% in New York where they gained 23% year to date. On Monday 29th, negotiations will also begin for Bilibili. The company funded by Tencent, Alibaba and Sony raised $ 2.6 billion, less than the initial target of $ 3 billion, as reported by Reuters, setting 25 million shares at the same price as those listed on Nasdaq, with a discount of 2 , 6%.
Fast-growing Chinese tech companies have long looked to the Nasdaq for capital raising, and last year, 30 Dragon companies raised $ 12 billion in the United States. However, the escalation of tensions between Washington and Beijing did not help. A congressional law recently provided for the possibility of removing from the lists Chinese companies that do not accept financial audits by the American regulatory authorities, a request to which Beijing is opposed, explains Asia Nikkei.
The situation could favor Hong Kong, which has already raised $ 31.4 billion in stock trading since the beginning of the year, compared to $ 8.6 billion in the same period last year and, according to Bloomberg, Asian technology companies have already committed $ 21.5 billion, a record. The trend accelerated last year, when secondary prices in Hong Kong raised $ 17 billion from companies such as Jd.com and Netwase. Since the former British colony reformed its listing system in 2018, recalls Ansa, there are already ten companies on the continent traded in the United States that have completed such transactions. China itself launched the Star Market in Shanghai in 2019, with the aim of creating "its own Nasdaq", providing simpler listing methods for innovative Chinese companies that will thus be able to stay at home.
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Baidu fails to make splash with Hong Kong debut
HONG KONG -- With investor excitement cooling toward Chinese technology stocks, search engine operator Baidu closed flat on its market debut in Hong Kong on Tuesday, while streaming service Bilibili priced its stock sale well below the maximum it had set earlier.
'Market sentiment towards technology stocks is weakening due to steepening interest rates and [an] equities sell off in the mainland that indirectly reduces inflows into Hong Kong,' said Ke Yan, head of research at DZT Research in Singapore.
The tepid welcome for Baidu and Bilibili is of concern to the string of companies waiting to follow their path from New York, where they have their primary listing, to Hong Kong amid tensions between Washington and Beijing.
Baidu shares ended the day at HK$252, matching their issue price of HK$252 after rising as high as HK$256.60 in early trade. The sale brought in proceeds of $3.08 billion. The Hang Seng Index closed 1.3% lower Tuesday.
Bilibili, meanwhile, is set to raise $2.6 billion in Hong Kong after pricing its local offering at HK$808 a share, according to two people familiar with the situation. The price represents a 2.7% discount to the stock's last close on the Nasdaq Stock Market but compares with a maximum HK$988 for retail investors indicated in the company's sale prospectus.
While some Chinese tech stocks, such as short video service Kuaishou, are still notching up eye-popping Hong Kong debuts, gains are scarcer than before. Of seven debuts of companies raising at least $100 million since Feb. 1, two ended down on their first day, one was flat and two others were just nominally higher, according to data service Dealogic.
This compares with average first-day gains of 19% in 2020 and 48% a year earlier among similarly sized offerings.
'Returning to Hong Kong for a second listing is a restart and second venture for Baidu,' said Robin Li, founder, chairman and chief executive, during an online listing ceremony on Tuesday.
'As a company that has always believed in and loves technology from day one, we are more willing to invest for the long-term and for the future,' he said, highlighting plans for further spending on artificial intelligence.
Baidu attracted applications from retail investors equal to 112 times the shares on offer, while institutional investors offered to purchase 10 times their allotment, according to a stock exchange filing on Monday.
Bilibili's offering, meanwhile, had already attracted retail orders for more than 60 times the shares on offer as of late Monday, while the institutional offering was also several times subscribed, according to the people familiar with the deal. Bilibili counts Alibaba Group Holding and Sony among its backers. The shares are due to debut on March 29.
Baidu shares have dropped nearly a fifth from their February peak on the Nasdaq while Bilibili has ceded almost a quarter of its value. The MSCI China Tech 100 Index, which tracks the largest Chinese tech stocks globally, has slumped 21% from a February high.
New York-traded Chinese companies working on listings in Hong Kong include Tencent Music Entertainment Group, Twitter-like service Weibo and e-commerce company Vipshop Holdings, according to people familiar with the transactions.
Such so-called homecoming listings, which began with Alibaba in 2019, are picking up momentum as U.S. authorities, including the Treasury, Defense and Commerce departments and the Federal Communications Commission, have blacklisted Chinese companies. Under a law passed last year, Chinese companies face expulsion from American exchanges unless U.S. regulators are permitted to review their audit records. Beijing forbids such reviews, citing national security.
The FCC this month designated five Chinese companies, including Huawei Technologies and Hangzhou Hikvision Digital Technology, as posing a threat to national security under a 2019 law aimed at protecting U.S. communications networks.
That move came just days after CNOOC, the largest Chinese offshore oil producer, was expelled from the New York Stock Exchange to comply with an executive order issued last November by then-President Donald Trump. The order restricted U.S. investment in companies found to have ties to the Chinese military.
China Mobile, China Telecom and China Unicom (Hong Kong) were removed from New York trading in January. All four companies have sought a review of their removal.
While most blacklisted Chinese companies are state-owned enterprises, Baidu has looked vulnerable since phone maker Xiaomi was put on the military-linked list in January. Officials disclosed last month that the designation related to a state award given to Xiaomi's founder and the company's ambitious investment plans in artificial intelligence and 5G technology.
Xiaomi, however, won a court order this month freezing its designation, with a U.S. judge ruling that the move had not been well justified.
Additional reporting by Nikki Sun
