China's unicorn shortcut sidelines IPO reform 

Ant Financial CEO Eric Jing speaks during the Ant Financial event in Hong Kong, China November 1, 2016. REUTERS/Bobby Yip

HONG KONG (Reuters Breakingviews) - China may have another way to get around IPO reform: luring tech unicorns with easier listings. The securities watchdog is mulling faster IPO approvals for big tech names. Letting Jack Ma’s Ant Financial, last valued at $60 billion, jump the queue may convince other entrepreneurs to list at home, eschewing venues in New York and Hong Kong. But this would be a poor substitute for meaningful reform.

Reuters reported Friday that companies being considered for a fast track by officials include Ant, the fintech affiliate of Alibaba, online insurance outfit Zhong An Property and Casualty, and Qihoo 360, the anti-virus software maker that delisted from New York in 2016 to go private in a $9.3 billion deal.

Chinese planners have a history of talking up IPO market reform, including a switch to a registration-based system as well as the launch of an international board that would allow foreign companies in China to raise capital. Both have yet to materialise.

But if true, this could be a huge win for China’s bourses. Domestic valuations have been climbing this past year, but a queue of some 700 companies waiting for listing approval, combined with higher requirements for profitability in some cases, has pushed fast-growing tech stars to look abroad. In December, the selfie app maker Meitu, with a market value of $5.5 billion, debuted in Hong Kong. Last year Reuters reported that the Apple-backed ride-hailing giant, Didi Chuxing, had ruled out a stock market floatation in China, citing a person familiar with the deal.

The risk is that snagging a handful of high-profile tech listings from Hong Kong and New York will come at the expense of genuine liberalisation. Beijing’s micromanagement of the pace and pricing of new listings has fanned speculative bubbles. That has pushed up already-frothy valuations for the few internet companies that do manage to list: the tech-heavy ChiNext board trades at some 49 times earnings, Eikon data shows. This latest unicorn hunt only adds to a growing list of ad-hoc band-aids applied to self-inflicted wounds.

The views expressed in this article are not those of Reuters News.


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