Global IPO: Chinese Market Moving Towards Hong Kong Listing
China’s biggest fast-food chain operator, Yum China Holdings Inc. (“Yum China”) has filed confidentiality for a Hong Kong listing that could raise about $2 billion.
Yum China operates 9,295 restaurants in over 1,400 cities in the country, according to its website. They reported a 24% year over year decline in 1Q revenue and said it expects an extended recovery period.
The U.S. Chain brands including KFC, Pizza Hut and Taco Bell in China also submitted a stock listing application to the Hong Kong exchange in recent weeks, the people said, asking not to be identified because the information is. not public.
Exclusive-Nasdaq tighten listing rules
The Nasdaq Stock Market (“Nasdaq”) has notified the Securities and Exchange Commission (“SEC”) that they are planning to tighten rules for companies based in “Restricted Market,” that would make Initial Public Offerings (“IPOs”) more difficult for some Chinese firms.
According to the Nasdaq’s public notice to the SEC, Restrictive Markets are defined as:
“A jurisdiction that Nasdaq determines to have secrecy laws, blocking statutes, national security laws or other laws or regulations restricting access to information by regulators of U.S.-listed companies in such jurisdiction.”
China companies leaving U.S Market at fastest paced since 2015
According to Bloomberg, Chinese companies are leaving U.S. Market at the fastest pace since 2015. There were not even many deal transactions from 2017 through 2019. As of June 2020, the value of buyouts has decreased by 72.8% since 2015 ($29.8 billion).
Despite the fact, the number of U.S. listed Chinese companies turning to the Hong Kong market for fresh funds. According to Bloomberg, the tensions between the two countries and fallout from Luckin Coffee Inc.’s accounting scandal threaten to limit Chinese firms’ access to U.S. capital markets. Chinese online retailer JD.com raised $3.9 billion in its Hong Kong listing, while gaming company NetEase Inc. raised $2.7 billion for its Hong Kong share sale on June 11.
“The Covid-19 pandemic has also made some U.S listed Chinese companies look relatively undervalued”, according to Steven Tran, a Hong Kong-based partner at law firm Mayer Brown.
