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* Some 30 Chinese companies seen going public in U.S. in
* JD.com could be second-biggest Chinese IPO in the United
* Chinese IPOs in U.S. posted 53 pct average 1st day pop in
* About $36 bln raised by Chinese IPOs since 2000 in the
By Denny Thomas and Elzio Barreto
HONG KONG, Feb 11 Chinese companies are flocking
to the U.S. IPO market in their biggest numbers since 2010,
drawn by soaring valuations for tech start-ups and undeterred by
a flare-up in an accounting row between Washington and Beijing.
Some 30 Chinese companies could list in the United States
this year, according to investment bankers interviewed by
Reuters. That includes JD.com Inc, China's second-biggest
e-commerce firm after Alibaba Group Holding Ltd. It said last
month it is seeking to raise $1.5 billion, in what may be the
second-biggest U.S. IPO by a Chinese company.
The return to U.S. shores comes on the back of renewed
investor enthusiasm for China plays, particularly for Internet
stocks. The country's online retail market by transaction volume
jumped 42 percent last year to 1.85 trillion yuan ($305 billion)
and is expected to almost double in size by 2016, according to
figures from iResearch.
That has trumped lingering concerns about accounting
irregularities and corporate governance issues that have forced
many U.S.-listed Chinese firms to be delisted since 2011.
The delistings have prompted investors to be more discerning
about China IPO candidates this time around. The bar for Chinese
companies seeking U.S. deals is higher, improving the quality of
recent offerings, bankers say.
But not everyone is so certain about that.
John Hempton, chief investment officer of Sydney-based
Bronte Capital, said a lack of penalties for Chinese firms' past
misdeeds in the 2011 scandals meant the potential to find
accounting fraud was always there.
"We welcome the new bull market," said Hempton, best known
for having taken short positions on several U.S.-listed Chinese
companies in the past. "We hope that they issue hundreds of new
shares because they will provide our future happy hunting
And bull market it is. While only eight Chinese companies
listed in the United States last year, raising a combined $1.1
billion, the returns have been spectacular.
Semiconductor solution provider Montage Technology Group Ltd
and 58.com Ltd, billed as China's Craigslist,
have jumped at least 70 percent since their debuts. Online
sports-lottery operator 500.com has nearly tripled in
value since listing in late November.
Newly U.S.-listed Chinese firms rocketed an average 53
percent on their debuts last year, according to consulting firm
EY. The technology-heavy Nasdaq Composite Index rallied
28 percent over the past year.
"The last companies that went public, proved to the street
that there's a lot of growth still here," said David Chao,
co-founder at venture capital firm DCM, which is based in
Silicon Valley and has invested in several U.S.-listed Chinese
The 2011 scandals sparked much tension between regulators of
both countries regarding the oversight of auditors and access to
company information that has continued ever since.
Indeed, JD.com's announcement came less than two weeks after
a U.S. Securities and Exchange Commission (SEC) judge
recommended banning Chinese units of the Big Four accounting
firms from auditing U.S.-listed companies.
But the two sides could be close to a deal that would allow
Washington to inspect the audit work of accounting firms in
China, a U.S. audit watchdog said last week, which could go a
long away to alleviating strains.
Paul Botlz, partner at law firm Ropes & Gray said Chinese
companies should not be put off by the apparent escalation of
the standoff due to the SEC move.
"I think this is a bit of a blip. I would advise companies:
don't be too spooked, if you want to go to U.S. markets don't
let this stop you, just check with the auditors on what's their
back-up plan," he said.
For Chinese companies, the U.S. market affords them options
not available in Hong Kong, such as dual-class structures and
the ability to list without having turned a profit. It also
offers far more liquidity than the newly reopened mainland China
This year, in addition to JD.com and a $300 million offering
from a security software unit of Kingsoft Corp Ltd,
IPO candidates include real estate website Anjuke.com, gaming
company Chukong Technologies and online cosmetics company
Jumei.com, bankers said.
Anjuke did not reply to an e-mail seeking comment.
Representatives for Chukong were not available for comment and
Jumei.com could not be reached for a comment.
Companies that are likely to benefit from the boom in China
consumer spending will be in greater demand than software makers
facing potential piracy or companies in the heavily-regulated
financial services sector, Chao at DCM said.
Most of the China firms that list in the United States use a
structure known as variable interest entities (VIEs). This
vehicle gets around Chinese rules against foreign ownership in
sectors such as online retail and e-commerce. A VIE will give
investors access to a company's profits but not give them any
ownership of the company.
"As people see value in the stocks and deals started to
perform, returns could potentially offset the additional risk,
like VIE, that people take when they invest in China," said
Joaquin Rodriguez Torres, head of technology, media and telecom
investment banking in Asia at Deutsche Bank, which worked on the
IPOs of 500.com and travel services company Qunar Cayman Islands
Ltd last year.
More than 140 Chinese companies have raised $36.6 billion
through U.S. IPOs since 2000, Thomson Reuters data shows, with
the peak in 2007 when they raised a record $6.9 billion.
($1 = 6.0634 Chinese yuan)
(Additional reporting by Stephen Aldred and Alice Woodhouse in
Hong Kong, Paul Carsten in Beijing, Rachel Armstrong in
Singapore and Olivia Oran in New York; Editing by Michael
Flaherty and Edwina Gibbs)