China's offshore IPO process faces regulatory obstacles, dampening firms' access to capital

From Investing.com: 2024-06-02 19:10:44

China’s promise to streamline offshore listings has led to a regulatory logjam, dampening firms’ hopes for easier access to capital. Despite an improved market sentiment, valuations are expected to decrease. With at least $20 billion worth of deals awaiting approval, Chinese companies are feeling the impact of a slowdown in IPO opportunities.

Although there has been an uptick in monthly approvals for IPOs, the majority are not expected to exceed $500 million. Delays in the approval process have been attributed to inter-departmental scrutiny, particularly for firms with a variable-interest-entity structure. The regulatory hurdles have led to uncertainty and delays, impacting firms seeking offshore listings.

CSRC approval is crucial for companies looking to launch an IPO, with the process typically delaying offerings by two to three months. Chinese firms have seen a decline in offshore IPOs, raising $1.5 billion as of May 17, a significant drop compared to the record set in 2021. The complex regulatory environment has added to the challenges faced by issuers and investors in the current market.

The prolonged approval process has been exacerbated by China’s economic slowdown and the property sector crisis. Companies like JD Industrials are still awaiting approval even after filing for a Hong Kong listing over a year ago. Some IPO aspirants fear having to accept lower valuations if demand weakens by the time approval is granted, adding to the uncertainty in the market.



Read more at Investing.com: Analysis-Red tape clogs China’s offshore IPO pipeline even as markets recover By Reuters