Chinese tech companies apparently reacting to increased regulatory scrutiny tied to the delay of Ant Group‘s planned $37 billion IPO are dropping their own plans to go public in droves, the Financial Times reports.
The paper stated that 76 suspensions of planned IPOs in March constituted a record and represented more than a doubling from the previous month’s IPO suspensions.
The Financial Times said it based its findings on its analysis of initial public offerings planned for the Star Market, which opened in 2019.
When regulators required that Ant Group pull its planned IPO in November, the Financial Times reported, only 12 had previously been delayed. Since then, according to the paper, 180 companies have dropped plans to go public on the Star exchange.
The Financial Times asserts in its article that the disruption in IPOs could hurt China’s effort to develop domestic capital markets — a priority made even more important because of a recent U.S. law that is making it hard for some companies to remain listed on U.S. exchanges.
The Financial Times also notes that China’s erection of hurdles to IPOs appears to represent a reversal of President Xi Jinping’s support for them several years ago.
“The Star [Market] was genuinely meant to be a step in the direction of reform — what’s happening now is most certainly not,” Fraser Howie, an expert on Chinese markets, told the Financial Times. “That has to be a worry in that even in China’s financial space, which was becoming more open and more market-driven, some of that is rolling back.”
The Financial Times cited data provided by East Money Information indicating that nearly 2,300 companies — a backlog of about four years — are waiting to go public.
The Financial Times quoted analyst Thomas Gatley of Gavekal Dragonomics as having said the IPO picture is further clouded by government preference for IPOs by companies in favored sectors such as semiconductors.
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