China Approves First Dual-class IPO In Move To Lure Tech Firms

China is set to see the first dual-class listing in the domestic market, as the nation aims to stem an exodus of technology firms seeking listings overseas.

Chinese cloud storage provider UCloud Technology last Friday obtained approval from the Shanghai Stock Exchange for an initial public offering on the Star market, according to an exchange filing. It is the first company with unequal voting rights to get approval from the exchange for such listing, according to data compiled by Bloomberg.

According to the filing, three of UCloud’s shareholders currently own a combined 98 million A-class shares of the company, or about 27% of the firm’s total issued shares. These three represent a combined voting rights of 65%. The company aims to raise about 4.7 billion yuan ($660 million) via the IPO, according to a separate exchange filing.

The approval came hours before Bloomberg News reported that the Trump administration is considering various measures to limit U.S. investors’ exposure to Chinese assets, including possible delisting of Chinese firms from U.S. exchanges.

Although a U.S. Treasury official said there are no current plans to stop Chinese companies from listing on U.S. bourses, Citigroup Inc. analysts including Alicia Yap wrote in a research note that U.S.-listed Chinese firms may see negative overhang to last for a while and those with ADRs may consider a dual listing in Hong Kong and eventually listing back in China.

“UCloud’s IPO approval is a milestone for China’s domestic capital market,” said Fu Lichun, analyst at Northeast Securities Co. “More and more tech firms with dual-class share structure may be encouraged to list domestically and the move may also attract overseas-listed Chinese companies to list back home,” said Fu.

China launched the NASDAQ-style Star market in the middle of this year, a new trading venue that is the only one currently allowing companies with dual-class share structure to go public. UCloud still needs to register with the China Securities Regulatory Commission for its offering.

Bloomberg