In a bid to induce tech behemoths to list on domestic stock exchanges rather than go abroad, China’s securities regulator is considering providing some of the country’s biggest tech companies a shortcut to going public. The regulatory body hopes that by doing this, it would be able to make China a more attractive destination for big shot firms looking to sell their shares to the public.
As per Reuters, which cites people with intimate knowledge of the matter, the companies being considered at present include Alibaba Group’s Ant Financial affiliate, Zhong (property and Casualty Insurance) and security software maker Qihoo 360 Technology Co.
The one thing these firms have in common, is that they are all huge. Ant Financial for instance, is the world’s most valuable financial technology company. It is expected to IPO this year in what could be 2017’s largest public offering. The firm, which was valued at around $60 Billion in its last funding round, is said to be eying the Hong Kong stock exchange.
Meanwhile, the security regulatory body’s move comes at a time when the NYSE and NASDAQ have proved themselves to be significantly more capable of attracting companies looking to IPO. Among other things, this has also been in part due to the Chinese securities regulatory commission’s seeming reticent attitude when it comes to giving permissions to companies looking o go public. Apparently, in Shanghai or Shenzhen alone, there are almost 700 companies waiting for permission from the China Securities Regulatory Commission (CSRC) to go public.
What’s more, you can expect a 18 month wait period if you want to raise funds in the Chinese market. Considering the rapidly changing dynamics of the market — that is definitely not something that companies — particularly those competing at a global level — would be okay with. Take Snapchat for example. How do you think the company would react if it was told that its IPO would happen a year and a half from now? They would probably blow a fuse.
So yeah, conditions in the Chinese market aren’t exactly the most conducive to a company looking to go public. The securities exchange wants to change that by offering a shortcut to some of the most valuable Chinese companies around. If the experiment proves successful, we can expect more companies to show an interest in IPOing from Chinese stock exchanges.
This is not the first time that such an experiment is taking place though. Something of the sort took place in September, last year when the CSRC allowed some companies to fast track the processes. While there are rumors that the CSRC is already engaging in talks with the firms mentioned above, everyone involved has refused to comment on the matter.
