Wandas Downsized IPO Marks Another Choppy US Listing For Chinese Firms

Wanda Sports Group Co.’s diminished aspirations for its initial public offering may not suppress Chinese companies’ appetite for US listings — but the performance of many newly public stocks might at least give them pause.

On Wednesday, the Beijing-based sports promoter, a unit of billionaire Wang Jianlin ’s conglomerate Dalian Wanda Group Co., downsized and cut the offer price for its IPO set for Thursday. Instead of raising $500 million by selling 33.3 million American depositary shares for $12 to $15 each, Wanda Sports is now shooting for 28 million shares at $9 to $11 to raise as much as $308 million.

Wanda Sports will become the 17th China-based company to list in the US this year, according to data compiled by Bloomberg. That compares with 35 US IPOs by Chinese companies for all of 2018. This year’s listings have included household names such as DouYu International Holdings Ltd. and Luckin Coffee Inc.

Despite US-China trade tension and calls from lawmakers on increasing oversight on US listed Chinese companies, cross-border IPOs remain strong. Assuming the second half of the year sees the same number of IPOs as in first half, 2019 will be the second-biggest year for US listings by Chinese companies since 2010, just behind 2018.

‘Discussion Point’

While strained trade relations are a “discussion point in every conversation” with Chinese executives considering US listings, they aren’t a limiting factor, said Nasdaq Inc. Senior Vice President Bob McCooey, head of the exchange’s Asia-Pacific listings business.

“Our pipeline has never been stronger for companies looking to access the US markets,” McCooey said in an interview. “The reality is we’re tracking well over 100 companies that could be public by end of 2020.”

Listing venues that are closer to home are also competing for deals. This month, China launched a Nasdaq-style trading venue in Shanghai that aims to make it easier for high-tech companies to access funding.

Relaxed Rules

Hong Kong, known for its protectiveness of mom-and-pop investors, has relaxed its rules by allowing companies to list with dual-class shares after rejecting the notion for years. Alibaba Group Holding Ltd., people familiar with the matter have said, has filed confidentially for a second listing in Hong Kong after choosing the New York Stock Exchange for its record $25 billion IPO in 2014.

The performance of Chinese companies once public in the US may be cause for caution though. Ten of the 16 companies that have gone public this year are trading below their IPO price, the data shows.

Ruhnn Holding Ltd., a Chinese company that promotes e-commerce through online influencers, has fallen 70% since its $125 million IPO in April, making it the worst performer of the 149 US listings this year.

Slowing Economy

“We are finding some weakness in sentiment over US-China trade tensions and overall weakness in the China ADR stocks as a result of increased concern over a slowing economy in China,” said Brandi Piacente, president of The Piacente Group, which advises Chinese companies on listing in the US

Still, US listings remain “the preferred method to access capital and build a long term future,” Piacente said.

Of the 87 Chinese firms that have gone public in the US since Jan. 1, 2016, only 23 are trading above their IPO price.

The stocks are under-performing both domestic shares and the S&P 500. The S&P/BNY Mellon China ADR index has generated a return of 13.8% this year, compared to 19.8% for the S&P 500 and 17.8% offered by Shanghai Stock Exchange Composite Index.

Faring Better

The 181 Chinese companies that have listed domestically this year, including in Hong Kong, have fared better. Shares in those companies are up an average of 69%.

The path of a US listing sometimes has bumps in it.

DouYu delayed its debut for two months, due to market jitters on trade in May. Semiconductor Manufacturing International Corp, a major Chinese chipmaker, delisted its American depository shares in June, citing low trading volume and the “significant administrative burden” in the US.

Wanda Sports is set to price its shares Thursday and begin trading Friday. It is required under a covenant to use some of the IPO proceeds to repay an 11.5% loan related to the group’s restructuring, with the rest to fund investments and for general corporate use, it said in its filing.

The offering is led by Morgan Stanley, Deutsche Bank AG and Citigroup Inc. Wanda Sports is expected to trade on the Nasdaq Global Market under the symbol WSG.

Bloomberg