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What is it like for Netease Jingdong to hear multiple enterprises seeking to return through the Hong Kong Stock Exchange?

via:《财经》新媒体     time:2020/5/29 16:53:47     readed:882

In the afternoon of May 29, according to the Hong Kong stock exchange documents, Netease has passed the listing hearing of the Hong Kong stock exchange. Meanwhile, Bloomberg News reported that JD has also submitted the listing application to the Hong Kong Stock Exchange and passed the listing hearing.Later, Ding Lei, founder and CEO of Netease, issued a letter to all shareholders, saying that Netease is preparing to go public in Hong Kong for the second time. Jingdong said to Caijing new media that it is not convenient to be interviewed for the time being.

Original title: Netease, Jingdong through the Hong Kong Stock Exchange listing hearing, a number of enterprises seeking to return to what kind?

On one side, it is open, on the other side, it is regulated. Listed in "the west is not bright and the East is bright", more technology companies began to focus on Hong Kong.

Liu Yang, new media of Finance and Economics

Editor Jiang Shizhou

Earlier media reported that Netease plans to go public again in Hong Kong on June 11, with a maximum fund-raising target of $2 billion. A week later, Jingdong will also go public on June 18, with a maximum fund-raising target of $3 billion through the sale of 5% equity.

In this regard, Shao Yu, chief economist of Oriental Securities, told Caijing new media that the main reason why a number of China concept stocks chose to go to Hong Kong for listing is that the United States tightened the management rules for China concept stocks and chose Hong Kong as the second listing place, which is a plan B for enterprises. "Listed companies have at least one sustainable financing platform if they have problems in the US market."

On the one hand, it is the guidance of policy factors, on the other hand, it is the consideration of enterprises themselves. Tiger securities investment and research team analyzed Caijing's new media reporter that the return of China capital stock to Hong Kong stock is not directly related to the degree of regulatory strictness in the United States. The company is an independent individual, and the outstanding company has little worries from regulatory. The second listing back to Hong Kong is more important to disperse the risks of the secondary market, increase its influence in different markets, and also bring new development to the company The fund.

Are Chinese stocks listed in Hong Kong?

Jingdong has been "premeditated" for a long time, and Netease "believes in the power of love"

Earlier, brokerage China reported that Jingdong would put up a prospectus on the Hong Kong Stock Exchange as soon as May 31, and start offering around June 4. In addition to the leading banks such as UBS and Merrill Lynch, the Jingdong underwriting group also includes BOC International, BOCOM international and CMB international.

It is understood that the second listing plan of Jingdong to Hong Kong has been "premeditated" for a long time. Previously, it was reported that Jingdong had planned to go public again in the first quarter of this year, but it had to be postponed due to the epidemic. At the same time, since 2020, Liu qiangdong has resigned from nearly 50 senior management positions in his company, and several other senior managers have also made adjustments during this period. This series of operations is also interpreted as "the preparatory action for the secondary listing".

Liu qiangdong, founder, chairman of the board of directors and chief executive officer of Jingdong group (NASDAQ: JD), holds 16.2% of the equity of Jingdong directly and on behalf of him, representing 78.7% of the voting rights, according to a document submitted by Jingdong to the US Securities Regulatory Commission (SEC) on February 11. Hong Kong listing can also meet the demand of different rights of the same share.

In terms of the financial report of JD, according to the financial report of the first quarter of 2020 issued by JD on May 15, the company's operating revenue is 146.2 billion yuan, up 20.75% year-on-year, higher than the market expectation of 136.666 billion yuan. Under non-U.S. GAAP, the company's net profit is 3 billion yuan.

Akira Junji, an Internet analyst, once analyzed that Jingdong is currently in a good market stage and will not change for at least one year. Although Jingdong has begun to make profits, it is far from enough for the business it wants to develop. Jingxi, logistics and other businesses sink into the market and need a lot of capital investment. Expanding the second listing place also provides a new channel for its financing.

According to media sources, Netease, which sought to hear the listing of the Hong Kong Stock Exchange on the same day, plans to complete its second listing in Hong Kong on June 11, while another source said that Netease will offer shares in Hong Kong on June 1 (Monday). It is understood that Netease's secondary listing in Hong Kong is expected to raise between us $1 billion and US $2 billion, with Credit Suisse, JPMorgan Chase and CICC as joint lead underwriters to arrange the listing.

The first quarter financial report of 2020 issued by Netease on May 20 shows that the net income of Q1 is 17.06 billion yuan, an increase of 18.3% year-on-year; the gross profit is 9.38 billion yuan, an increase of 21.2% year-on-year; the net profit of continuous operation attributable to the company's shareholders is 3.55 billion yuan, an increase of nearly 30% year-on-year.

All indicators are higher than expected, and we are not afraid that the Hong Kong capital market will not buy the account, which gives Netease the confidence to go public again. In a letter to all shareholders, Ding Lei said that globalization is the inevitable choice that Netease will make on the basis of its own strength improvement. Next, Netease will base itself on China and continue to promote innovation and breakthrough in overseas markets through internal incubation, investment, cooperative development and strategic alliance.


Letter from Ding Lei, CEO of Netease to all shareholders

In fact, Netease sought to list in Hong Kong in 2002. At that time, the company's performance grew rapidly after Netease added code to the online game, but Netease's share price in the US Nasdaq market even reached a new low. Li Tingbin, chief financial executive of Netease at that time, once said that the daily trading volume of Netease stock in Nasdaq market was only tens of thousands of shares, and the sluggish trading volume was not conducive to the development of the company. The company was considering re listing in Hong Kong GEM and other places, and said that it could consider listing in the mainland securities market if conditions permit. However, for various reasons, the plan failed to come true.

There has been a backflow of China capital stock for a long time. A number of China capital stock companies have chosen Hong Kong as the second listing place or returned to the A-share market in various ways.

SMIC international, founded in 2000, listed in the United States and Hong Kong in 2004. However, due to low transaction volume and high cost, in May 2019, SMIC announced to delist American depository receipts from NYSE and downgrade them to OTC market. Recently, SMIC International (00981. HK) announced that it plans to issue no more than 1686 million shares on the science and technology innovation board. SMIC also said in the announcement that the issuance of RMB shares will enable it to access China's capital market through equity financing, and improve its capital structure while maintaining its international development strategy. In the interests of the whole.


Photo source: SMIC international announcement

In addition, with the completion of the reform of the listing system of new economy companies by the Hong Kong Stock Exchange last year, Alibaba, which lost its hand in that year, once again chose Hong Kong as the second listing place and successfully listed in November 2019. Alibaba raised a total of HK $101.2 billion in Hong Kong listing, accounting for 32.4% of the total amount raised in Hong Kong IPO market that year. It is the third largest IPO in the history of Hong Kong stock exchange, and the third company with different rights under the new listing system. For Alibaba, listing in Hong Kong can be closer to the Southeast Asian market and facilitate the investment and trading of Oriental investors. According to media analysis, "one of the major advantages of Alibaba's listing in Hong Kong is to close the distance with local and regional investors, enrich and expand the shareholder base. In addition, there is a time difference between Hong Kong and New York. The two listings can meet the needs of investors for all-weather trading and further improve liquidity."

According to the analysis of tiger securities investment and research team, the return or delisting of Zhongwei shares is not directly related to the regulation of the United States. The company is an independent individual, and the outstanding company has few worries from the regulation. The second listing back to Hong Kong is more important to disperse the risk of the secondary market, increase its influence in different markets, and also bring new funds to the development of the company. "Companies have their own strategic considerations when they choose to go public, and they will not blindly follow or change at will." Tiger securities investment research team thinks so.

Deng hori, manager of the monetary fund, told Caijing new media that under the condition that international capital is optimistic about China, China capital stock will be listed through Hong Kong stock market. On the one hand, it will be more convenient to get the favor of international capital, and on the other hand, it can also give mainland investors the opportunity to invest in enterprises with the help of Shenzhen Hong Kong stock connect and Shanghai Hong Kong stock connect. It can be called "one stone, two birds".

"The west is not bright, the East is bright"?

The return of China's capital stock is the consideration of enterprises' own development

On one side, it is open, on the other side, it is regulated. Listed in "the west is not bright and the East is bright", more technology companies began to focus on Hong Kong.

According to six questions on the return of China capital stock to Hong Kong stock issued by CICC, there are 234 China capital stocks mainly listed in the United States, with a total market value of about $1.2 trillion (as of February 13, 2020). Most of them come from the Internet, technology (including financial technology), consumption, medicine and other new economic fields. The market value and liquidity distribution are polarized. There are 30 companies with more than $10 billion and 22 companies with an average daily trading volume of more than $50 million. At the same time, according to the statistics of CICC, there are 19 companies with a total market value of about US $340 billion that meet the conditions for listing in Hong Kong.

After the new regulation came into effect, HKEx became a listing alternative for many new economy companies, which also made it the top IPO fundraising amount in the world's major exchanges in that year. According to statistics, in 2019, there were 183 newly listed companies on the Hong Kong stock exchange, raising 31.2741 billion Hong Kong dollars, and 350 enterprises submitted listing applications. Among them, Alibaba and Budweiser Asia Pacific are the second and fourth largest IPO projects in the world in 2019.

On May 11, Hang Seng index issued a consultation summary and launched a huge reform, which was included in the stock selection of companies with different rights and second listed companies to hang seng index and Hang Seng China enterprise index. Since then, the same share companies with different rights from the mainland, Hong Kong, Macao and Taiwan, as well as the secondary listed companies in Hong Kong, will be included in the stock selection of Hang Seng Index and Hang Seng China enterprise index. Such companies are capped at 5% of the index. This measure will attract more capital inflow and enhance the valuation of Hong Kong stock companies.


Photo source: Internet

According to Shao Yu, the choice of listing in Hong Kong means more opportunities. At the same time, the funds raised by the company are foreign currencies, which can also meet the special allocation needs of enterprises.

On May 20, the U.S. Senate passed the foreign companies Liability Act, which stipulates that if any foreign company fails to comply with the auditing requirements of PCAOB for three consecutive years, its securities will be prohibited from being listed and traded on the U.S. stock exchange, and the listed companies will be required to disclose whether they are owned or controlled by the foreign government. This may not only increase the difficulty of listing Chinese companies in the United States, but also increase the listing cost and audit risk of listed companies.

Under the combination of uncertainties, many companies began to consider backflow. In May 21st, Baidu founder Robin Li publicly told the media that he was discussing the two listing of Hongkong and other places. Ctrip, a US listed company, is also expected to list in Hong Kong.

The withdrawal of Chinese stocks is not necessarily a good thing for the U.S. stock market. According to Deng hore's analysis, when excellent companies withdraw from the U.S., the international capital keen on these companies will also follow the transfer, which is a drastic move for the U.S. stock market. On the contrary, if they retreat to Hong Kong or go public in Hong Kong for a second time, it will further strengthen Hong Kong's position as an international financial market. At the same time, he said: "in the past, all Chinese stocks like to be listed in the US stock market, but now it's not enough to follow the prescription."

Tiger securities investment research team said that the company has its own strategic considerations when choosing the listing location, and each market has its own advantages and disadvantages. There is no time difference between the Hong Kong market and the mainland, so it is more convenient to trade; star enterprises are easy to become scarce targets, resulting in premium; there are more mainland investors in the Hong Kong market, who have a deeper understanding of local enterprises; at the same time, the regulatory pressure in the Hong Kong market is less, and it is more likely to support the listing of "same share with different rights" companies and be included in the Hong Kong stock connect or other indexes. On the contrary, there are many institutional investors and benchmarking companies in the US stock market; strict supervision can filter poor enterprises; listing in the US can also improve the international reputation of enterprises.

In addition to choosing a second place to go public, many Chinese investors have left the US stock market completely in various ways. In April, jumeiyoupin officially delisted from the New York Stock Exchange, ending its nearly six-year career of listing American stocks. In the return of China equity market five years ago, companies listed in the United States, such as giant network, Shanda game, perfect world, Qihoo 360, completed privatization and delisting. Most of their delisting is due to undervalued value, high cost of listing and maintenance, short by short institutions, strategic adjustment of companies and other reasons. After most enterprises return to the A-share market, the valuation is improved and the stock price is also strong.

In order to explore the domestic listing of red chip enterprises, the domestic capital market is also trying to make changes. On March 8, Wang Jianjun, general manager of Shenzhen Stock Exchange, who was first elected as a deputy of the National People's Congress, told the media at the two sessions that Shenzhen Stock Exchange has basically completed the preparation of rules to meet the "unicorn" enterprises. On April 30, China Securities Regulatory Commission released the announcement on relevant arrangements for the domestic listing of innovative pilot red chip enterprises, which adjusted the market value requirements for the listing of overseas listed red chip enterprises on the domestic stock market, so as to facilitate the return of qualified overseas Chinese shares to the A-share market. The road for China capital stocks to return to a is widening, which also provides more choices for China capital stocks.

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