JD.com Plans To Kickstart Hong Kong IPO As US-Listed Chinese Firms Increasingly Look Toward Home

Following in the footsteps of its bigger rival Alibaba Group Holding Ltd – ADR BABA, JD.Com Inc JD is planning to test the IPO waters in Hong Kong very soon, if reports are to be believed.

Alibaba undertook a secondary listing of its shares in the Hong Kong market late last year, raising $12.9 billion in the process.

JD.com Homebound?

JD.com is planning to raise as much as $3.4 billion by listing its shares on the Hong Kong Exchange, local media reports said. The e-commerce company is expected to set the ball rolling on the IPO May 25, with the listing likely to occur as early as June.

A slew of other U.S.-listed Chinese companies are also reportedly exploring this option of dual listing. Chinese search engine Baidu Inc BIDU, online gaming and entertainment company NetEase Inc NTES and online travel company Trip.com Group Ltd TCOM are also reportedly prepping for Hong Kong listings. 

Why The Newfound Interest In Chinese Exchanges?

Most Chinese companies appear to be stung by the stereotyping effect following revelations of fraud by fellow firms. The case in point is coffee retailer Luckin, which admitted in early April that its COO fudged transactions over the last year to boost sales.

Chinese video streaming company IQIYI Inc IQ was also accused of inflating financial numbers. Online educational services company GSX Techedu Inc GSX was at the receiving end after Citron Research accused it of falsifying enrollment numbers.

The mushrooming of fraud cases among U.S.-listed Chinese companies has caught the attention of U.S. lawmakers, some of whom are calling for regulations that would make it mandatory for Chinese companies to comply with U.S. federal auditing rules and disclosure requirements.

The pressure to abide by more stringent disclosure requirements could be one reason why some companies are looking elsewhere. 

Another reason is the worsening of U.S.-China ties. After the trade deal impasse affected relations for a while, the COVID-19 pandemic has only served to deteriorate it further.

President Donald Trump has accused China of spreading the virus from a lab, putting him at odds with U.S. intelligence agencies, while there is also a feeling among some quarters in the political echelon that gross mismanagement of the virus by China led to the epidemic graduating to the scale of a pandemic.

What The Hong Kong Listings Mean For The US

If any of these companies choose to delist from the U.S. exchanges, the U.S. will lose its clout as a conduit for international capital, according to the investment firm Jefferies, which was quoted by Reuters

The flurry of Chinese listings in the U.S. may also become a thing of past. About 23 China-based companies listed in the U.S. in 2019, raising about $3.4 billion in total, according to Renaissance Capital.

This, according to the firm, accounted for 14% of U.S. IPOs and 7% of total proceeds.

JD Price Action

At last check, JD.com shares were rising 2.24% to $47.76.

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