Bankers and advisers said that Didi Global's plan to withdraw from the New York stock exchange may cause an even deeper chill after this year's drop-off in Chinese firms' listings in the world's most liquid market.
Two days after Didi's $4.4 billion initial public offering, Chinese regulators ordered app stores to remove 25 of its mobile apps and block the app for new users in mainland China.
The US government's ongoing threat to delist Chinese companies that are not compliant with its audit rules has resulted in a slowdown in Chinese listings.
Since the first half of 2017 the second half of the year has been the quietest six months for U.S. listings by Chinese firms, and so far in the year 2021, listings have totalled more than $13 billion compared to $13.6 billion last year, according to Dealogic data.
The Securities and Exchange Commission SEC said on Thursday that Chinese companies must disclose whether they are owned or controlled by a government entity and provide evidence of their auditing inspections.
One Hong Kong banker told Reuters that they were only going to see limited IPOs out of China into the U.S. now, as the city's financial sector digested the impact of the decision on the listing pipeline.
The banker was not authorized to speak to the media because of the fact that he was not allowed to speak to the media.
Independent research analyst Mitchell Kim, who publishes on the Smartkarma platform, said that already cautious investors would become more nervous about future Chinese IPOs in the world's largest economy.
Chinese companies may be choked off from accessing U.S. capital, because U.S. investors may fear investing in Chinese companies, which may lead to Chinese companies being unable to access U.S. capital, Kim said. It's too early to say that the Chinese techs could face a bigger challenge because so many tech investors are based in the U.S. Golden Gate Ventures partner Justin Hall.
In the future, founders of Chinese technology companies may choose to use safer exchanges because all the time and resources required to list on the U.S. based exchanges would be for naught if they are required to delist. Hong Kong has benefitted from the Sino-U. Market participants say that S. spat with a string of US listed Chinese firms that have secondary listings there in recent years, partly as a back-up in case they are delisted from New York.
Sources told Reuters last month that Chinese regulators had pressed Didi's top executives to delist from the New York Stock Exchange because of concerns about data security.
If the data issue is resolved, then it will be ok, said the banker, who didn't want to be named due to the sensitivity of the matter.