China-Based IPOs Raised $11.7 Billion In 2020

Chinese companies held 30 initial public offerings (IPOs) this year, raising $11.7 billion, despite a tumultuous year in China-U.S. relations.

The IPO rate for Chinese companies is the highest since Alibaba’s massive market debut in 2014, according to CNBC, citing a new report from Renaissance Capital.

The Chinese IPO boom comes amid heightened tensions between the U.S. and China over trade and security issues. China and the U.S. are currently the world’s two largest economies.

The last big Chinese IPO rush occurred in 2014, when 14 companies, including eCommerce titan Alibaba, raised $25.7 billion.

This year’s IPO class included tech company Lufax and online real estate platform Ke Holdings, whose public offerings ranked in the top 10 biggest on the U.S. market for 2020, according to Renaissance Capital.

Other IPOs of note were grocery delivery service Dada, which is backed by Walmart; electric vehicle developers Xpeng and Li Auto; and LGBTQ dating app Blue City, CNBC reported.

A unit of Ping An Insurance Group, Lufax filed confidential paperwork with the U.S. Securities and Exchange Commission (SEC) in August. The move came as Treasury Secretary Steven Mnuchin warned that Chinese firms that wanted to be listed on U.S. stock exchanges would have to conform to U.S. auditing standards by the end of next year, including opening up their audit records to U.S. regulators, a move that would put the firms into conflict with secrecy laws in China.

Lufax was one of several Chinese firms that rushed to file their IPO paperwork with the SEC. Chinese real estate company KE Holdings, which filed its U.S. IPO on July 24, and XPeng were among the companies scrambling to beat the looming deadline.

But not all has been bright for Chinese companies going public on the U.S. markets. Several companies have had to shelve their plans because of the ongoing pandemic. Others have suffered from their own internal problems, such as Luckin Coffee, which was delisted in April over an accounting scandal. Prior to the scandal, Luckin had been the first company since the year 2000 to reach a $3 billion valuation within 24 months of listing, according to CNBC.

In September, China’s top regulator, the State Administration for Market Regulation, fined coffee chain Luckin and other firms that helped it inflate its sales and expenses last year. The regulator said it fined two Luckin entities alongside 43 other companies for 61 million yuan, or around $9 million USD.

Other companies have also seen their market appeal fizzle. Phoenix Tree’s shares, for example, have plunged since its IPO, making it the worst-performing IPO of the year, Renaissance Capital said.

Bloomberg reported in mid-November that the SEC is moving forward with a plan that could boot Chinese companies from U.S. stock exchanges. The regulation, intended to be introduced before year’s end, would have the effect of delisting companies for not following U.S. auditing rules. The issue, which has been fast-tracked since August, centers around the refusal from China to let U.S. inspectors from the Public Company Accounting Oversight Board (PCAOB) look over audits from Alibaba, Baidu and other firms trading in American markets, Bloomberg reported.