Bright Outlook for China IPOs Despite Policy Clouds

    Ravenous appetite for new listings in 2021, if politics doesn’t spoil the party

    The U.S. IPO market is off to a rollicking start in 2021, with 114 new listings in the month of January that have raised $36.1 billion. The top performer so far? RLX Technology, the Chinese e-cigarette purveyor that rocketed 146% on the first day's trading, is currently hovering at twice its offering price.

    In Investing in China, IPOs

    Chinese Companies Continued to Flock to U.S. Markets in 2020 Despite Regulatory Headwinds

    Best year for China IPOs since 2014, with proceeds up by 270% over 2019 to $13.3 billion

    The White House put over a dozen Chinese companies on an investment blacklist. Congress passed legislation to enforce long-neglected requirements for audit inspections or delist the offending companies from U.S. exchanges. China’s government announced antitrust investigations that shook the value of internet goliaths, Alibaba and Tencent.

    In IPOs

    House Passes Holding Foreign Companies Accountable Act

    Showdown Over Audit Inspections Reaches New Stage

    On December 2nd, 2020, the House of Representatives unanimously approved a bill that would bar Chinese companies from trading in the U.S. if their auditors are not subject to inspections by the PCAOB within three years. The "Holding Foreign Companies Accountable Act" was passed by the Senate in May and will now be sent to President Trump to be signed into law.

    In SEC Audits, Investing in China

    Could the SPAC craze come to Hong Kong?

    Four special purpose acquisition companies (SPACs) headquartered in Hong Kong carried out an initial public offering in the United States this year.

    Highlights from a keynote speech on ‘IPO Success Factors for Tech Companies from Greater China’ at the Cyberport Venture Capital Forum

    For those unfamiliar with the term, SPACs, also known as ‘blank check companies’, seek to pool money from investors with a plan to acquire an existing asset. For example, it could be a company whose existing investors are looking for an exit and would be happy to sell their interest. For companies, it gives them a convenient method of getting onto an exchange – SPACs are already listed on stock markets through an initial public offering (IPO) – and it gives the people backing the SPAC a chance to quickly get exposure to an emerging trend like the stock market bull run experienced by technology companies this year.

    In Advisory

    SPACs | A Guide for Management

    While special purpose acquisition companies (SPACs) have existed since the early 1990s, these investment vehicles have gained popularity in recent years. SPAC IPOs have raised over $49 billion thus far in 2020, outstripping all prior records, and many more have filed to go public by the end of the year. While in the past, most SPACs were taken public by boutique investment bankers and raised tens of millions of dollars, today, nearly every "bulge bracket" firm has led a SPACs deal, with proceeds up to hundreds of millions or even billions of dollars.

    In SEC Audits, Advisory, IPOs

    Unfazed by Regulatory Risks, Chinese Companies Upsize U.S. IPOs in Q3

    Q3 IPO proceeds up by 350% to $5.9 billion YoY

    Sustaining momentum may require clarity on listing and audit standards

    Despite a directive from a White House working group that could lead the SEC to close the door to companies whose auditors are not PCAOB-inspected, Chinese companies continued to raise significant amounts of capital on U.S. exchanges in the third quarter of 2020.

    In Investing in China, IPOs

    White House Weighs in on China Audit Conundrum

    Can the “co-audit” concept untangle PCAOB inspection impasse?

    On August 7th, the President's Working Group on Financial Markets weighed in on the dangers that investing in Chinese companies posed to U.S. investors. This report is the latest salvo following the passage of Senate's Holding Foreign Companies Accountable Act in May and an SEC roundtable on the risks of investing in emerging markets in July.

    In SEC Audits

    Auditors Face Access Challenges as COVID Pandemic Drags On

    The COVID-19 pandemic has created novel challenges for the audit profession that could have lingering impacts on the quality and reliability of independent accounting firm’s work if not carefully addressed. The increased reliance on remote auditing needs to be carefully managed particularly for auditors with clients in areas like China and Europe, where travel restrictions limit site visits compared to domestic locations that can be visited with COVID protocols in place. Management, audit committees, and investors all need to be aware of the limitations that auditors are operating under and the steps that can be taken to ensure that audit quality remains robust during this period.

    In SEC Audits
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