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