• 288 days Will The ECB Continue To Hike Rates?
  • 288 days Forbes: Aramco Remains Largest Company In The Middle East
  • 290 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 690 days Could Crypto Overtake Traditional Investment?
  • 695 days Americans Still Quitting Jobs At Record Pace
  • 697 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 700 days Is The Dollar Too Strong?
  • 700 days Big Tech Disappoints Investors on Earnings Calls
  • 701 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 703 days China Is Quietly Trying To Distance Itself From Russia
  • 703 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 707 days Crypto Investors Won Big In 2021
  • 707 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 708 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 710 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 711 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 714 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 715 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 715 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 717 days Are NFTs About To Take Over Gaming?
The Auto Industry Just Can’t Catch A Break

The Auto Industry Just Can’t Catch A Break

The already-struggling auto industry is…

Defensive Stocks Are Your Best Bet Against Inflation

Defensive Stocks Are Your Best Bet Against Inflation

Stretched asset valuations, ultra-high inflation,…

  1. Home
  2. Investing
  3. Stocks

The Secret To China’s Tech Sector Boom

China

Chinese tech IPOs are crushing it, and this year, China is dominating on the U.S. market. They’re going public at a faster rate than their American counterparts, and they’re getting there at breakneck speed—all because of a liquidity advantage.

In the third quarter of this year, 10 Chinese tech companies had IPOs, compared to only four tech companies based in the U.S. And that follows the first three quarters of 2018, which also saw the Chinese outdo their American peers by a wide margin, according to an IPO report from Renaissance Capital.

The key takeaways from the report were that in the U.S., 52 IPOs raised $11.2 billion in Q3 and the main drivers of the activity were biotech, tech and Chinese IPOs.

Three billion-dollar deals raised almost 40% of proceeds: Chinese e-commerce app Pinduoduo, Chinese electric car maker NIO and animal health pharmaceutical Elanco.

According to Renaissance, the 10 Chinese IPOs represent the largest number seen in U.S. markets since the second quarter of 2014.

(Click to enlarge)

Source: VentureBeat

According to TechCrunch, Chinese companies are hitting the IPO stage much faster than the Americans—only a few years after their initial venture investments.

This is how TechCrunch charts it out, from the Chinese angle:

(Click to enlarge)

The U.S. comparison takes twice as long, or longer:

(Click to enlarge)

A great case in point is Pinduoduo, the Chinese e-commerce platform. Related: Ripple’s Legal Limbo Weighs On XRP Prices

The Shanghai-based company went public in July and managed to raise $1.6 billion through a U.S. IPO, making one of the biggest deals of the year. In only three years, it managed to turn it’s e-commerce platform into a wild success, even in China’s hyper-competitive e-commerce market, where startups have to face down giants like Alibaba and JD.com.

And Pinduoduo isn’t an isolated example.

Another massive deal this quarter was NIO, the Chinese EV manufacturer, or the “Tesla of China”. It was founded only four years ago, and held its IPO in September, raising $1 billion.

True, NIO is now watching its stock fall below its IPO price on fears that it can’t compete with Tesla’s financials, but how it got where it is so quickly continues to turn heads.

Just two weeks ago, NIO was able to boast that its shares had gained 46 percent since its IPO, and it was the 29th most-held stock on the Millennial-popular zero-fee trading app, Robinhood.

By Renaissance’s count, there were 23 Chinese IPOs in the U.S. in the first nine months of this year, which fails to account for some major IPOs in Hong Kong.

Related: Is This The Beginning Of The End For Facebook?

And up next is another big one the market has been anticipating feverishly: Tech giant Tencent, the largest music-streaming company in China, boasting over 800 million total unique monthly active users.

It’s highly anticipated because if we go by the Wall Street Journal’s valuation estimates, this could end up being the biggest tech IPO in history.

Earlier this week, Tencent filed to go public in the U.S., and the WSJ has previously estimated its value at over $24 billion. In 2017, it was valued at $12.5 billion during an equity swap with Spotify Technology.

At the end of the day, it’s all about speed to liquidity, notes TechCrunch: “As China’s tech ecosystem sees more of its darlings mature and more consistently deliver smashing exits, investments in China will have to be a more serious consideration for VCs, even if only to minimize the sheer amount of time, resources, and painstaking energy needed to build a company in the U.S.”

By Michael Kern for Safehaven.com

More Top Reads From Safehaven.com:

Back to homepage

Leave a comment

Leave a comment