July Recap: Three Chinese IPOs Amid Continued Uncertainty, Looming Slowdown

A recap of July headlines with a quick overview of Chinese listings on Wall Street: DouYu, Wanda and Blue Hat.

Anna Vodopyanova
    Jul 31, 2019 7:00 PM  PT
July Recap: Three Chinese IPOs Amid Continued Uncertainty, Looming Slowdown
author: Anna Vodopyanova   

July has ended with the first cut in interest rates since 2008 by the U.S. Federal Reserve amid signs of a global economic slowdown and ongoing trade tensions with China. Another round of trade talks, completed Wednesday, took the United States and China one step closer to making a deal, but the finish line is nowhere in sight.

Huawei Technologies, one of the aching points in the trade war, reported a 23 percent surge in its half-year revenue thanks to domestic smartphone sales. However, founder and CEO Ren Zhengfei said the impact of the U.S. ban on the company's deals in the American market could cost it $30 billion. Huawei has been at the frontline in 5G development, leaving Washington feeling threatened on national security grounds.

Meanwhile, China is luring its promising high-techs back to list their stocks domestically. The Star Market, operated by the Shanghai Stock Exchange, launched last week in a frenzied debut, toppling all expectations. On average, companies going public on the new capital market skyrocketed 140 percent on the first day, with the worst performer rising 84 percent.

Separately, chief tech giant Alibaba Group Holding Ltd. (NYSE: BABA), reportedly preparing for a second listing in Hong Kong, has announced a 1-for-8 stock split that would come into effect on July 15 of next year. The company also said it is planning to extend its platform for U.S. merchants, which may shift the proportion of American and Chinese buyers and sellers on Alibaba.com. Currently, one-third of buyers on the platform is based in the United States, while 95 percent of merchants are based in China, as reported by Reuters.

In Hong Kong, protests continued for the eighth straight weekend. Demonstrators demand democratic reforms and condemn chief executive Carrie Lam and police violence in a massive movement that began in opposition to the proposed extradition bill. If enacted, the city would no longer guarantee refuge to people who are wanted in territories like mainland China, including political dissidents. CW columnist Mark Melnicoe wrote about the mistrust and discontent Hongkongers feel toward the Communist authorities earlier this month.

Other headlines to note: short-seller Muddy Waters alleged Anta Sports Products Ltd. (HKEX: 2020) manipulated its financial data; leader of Camsing International (HKEX: 2662) was arrested on suspected fraud; China's GDP grew at the slowest rate since 1992; So-Young International Inc. (Nasdaq: SY) sold and promoted banned drugs on its platform; Ping An-backed Lufax is leaving the P2P lending market; Gridsum Holding Inc. (Nasdaq: GSUM) is considering a buyout proposal; and SSLJ.com Ltd. (Nasdaq: YGTY) will delist from the Nasdaq.

$973 Million in IPOs

The freeze on Chinese listings, roused earlier this year by political uncertainty and the debate from some bipartisan groups, has ended with three Chinese companies becoming publicly traded on Wall Street in July.

DouYu International Holdings Ltd. (Nasdaq: DOYU) raised a massive $775 million, selling 67.4 million ADSs at $11.50 per share. The company is the largest game livestreaming platform in China, with the rival Huya Inc. (NYSE: HUYA) having completed its $180 million IPO in New York a year ago. Both are backed by Chinese tech giant Tencent Holdings Ltd. (HKEX: 0700).

DouYu's debut ended on a disappointing note and its shares have since dragged below the offering price, trading on Wednesday at $10.05 per ADS.

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Wanda Sports Group Co. Ltd. (Nasdaq: WSG) and Blue Hat Interactive Entertainment Technology (Nasdaq: BHAT) completed their IPOs last week, raising $190 million and $8 million, respectively.

Wanda, a sports unit of Chinese conglomerate Dalian Wanda Group, initially expected to raise up to $500 million, but sold fewer shares at a lesser-than-expected price of $8. Its IPO was just as bland as DouYu's, ending in red on debut and sliding ever since to today's intraday level of $4.82 per share.

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The smallest of the three IPOs was the most successful. Blue Hat, which makes AR toys and products, sold 2 million ordinary shares at $4 apiece and enjoyed a boost to $4.58 on debut. However, it did not manage to stay at that level, sharing in the fate of its peers and sliding to today's intraday price of $3.83 per ADS.

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(Images: Thomson Reuters Eikon)

While this month has been fruitful in terms of IPO money raised by Chinese companies, the outlook remains uncertain. Sliding stocks suggest waning investor interest amid ongoing tariff battles and a looming economic slowdown. Two stocks are expected to lift off in early August: WiMi Hologram Cloud and Hong Kong-based AMTD International. While it may be a challenge this year to top the $9.2 billion raised by Chinese ADSs in 2018, it will be a glorious year for those companies that do reach the finish line. 

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