Date
21 October 2019
As Hong Kong grapples with social disturbances in the wake of a controversial extradition bill, some companies have cancelled or postponed their IPO fund-raising plans. Photo: Reuters
As Hong Kong grapples with social disturbances in the wake of a controversial extradition bill, some companies have cancelled or postponed their IPO fund-raising plans. Photo: Reuters

Hong Kong loses IPO crown; social unrest to blame

Budweiser APAC scrapped its plan to raise up to HK$76 billion in a Hong Kong listing, a deal that could have marked the world’s biggest IPO this year.

Last month, Hutchison Chi-Med, a biopharmaceutical company backed by tycoon Li Ka-shing, and Logistics real estate developer ESR Cayman also delayed their local listings.

The three deals were intended to raise a total of roughly HK$90 billion.

It’s rumored that the cancellations of ESR and Chi-Med listing plans were due to the social unrest triggered by Hong Kong’s now-abandoned extradition bill.

Hong Kong was the top venue for IPOs last year, raising a total of HK$288 billion. But the US overtook Hong Kong in the first half of this year.

It’s estimated that the Hong Kong IPO market raised only HK$69.42 billion in the first six months of 2019, down 27 percent from the same period of last year, according to data from Refinitiv.

Uber alone raised US$8.1 billion in its IPO in US. That amount almost equals the total IPO fund-raising of Hong Kong in the first half.

Although the Hong Kong stock exchange has amended its rules to allow dual-class shares, so as to attract more new-economy firms, many mainland tech companies still opted for listing in the US rather Hong Kong.

For example, Chinese digital influencer incubator Ruhnn Holding raised US$125 million on the Nasdaq. Luckin Coffee, the Chinese challenger to Starbucks, raised US$561 million from US IPO. So-Young International, a China-based online marketplace for plastic surgery services, raised US$179 million.

The deals show that the US remains a more popular listing destination for tech firms. Hong Kong’s ongoing social turmoil raises questions about local governance, affecting investor confidence.

Hundreds of thousands of people have taken to the streets almost every weekend since June, and some protest marches ended up in in bloody clashes.

Hong Kong stock market’s daily turnover has been lackluster recently amid fears of political instability. It is possible that more companies will shelve or put off IPOs until the situation improves.

This article appeared in the Hong Kong Economic Journal on June 16

Translation by Julie Zhu with additional reporting

[Chinese version 中文版]

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RC

HKEJ contributor