Baidu Picks Banks for $3.5 Billion Secondary Listing in Hong Kong

China's largest search engine could begin its share sale in the first half.
Anthony RussoJan 07,2021,15:41

Baidu (Nasdaq: BIDU) has picked Goldman Sachs and CLSA Ltd. for its planned Hong Kong secondary listing that could net at least $3.5 billion.

China’s largest search engine intends on launching its share sale as early as the first half of 2021, as reported by Bloomberg.

The offering could include roughly 5% to 9% of its share capital. That would imply the offering size of $3.5 billion, considering its market capitalization of nearly $70 billion as of Wednesday close.

Baidu is bringing its listing closer to home simultaneously with online entertainment giant Bilibili (Nasdaq: BILI), whose secondary offering may raise more than $2 billion.

In 2020, Chinese U.S.-listed firms seeking share sales in Hong Kong were in hot demand, as trade tensions between Beijing and Washington picked up smoke. Companies including giants JD.com (Nasdaq: JD; HKEX: 09618) and NetEase (Nasdaq: NTES; HKEX: 9999) raised around $17 billion through their secondary offerings in the city, according to data compiled by Bloomberg.

The relations between the world's two largest economies remain tense, as U.S. President Donald Trump recently signed a bill that could delist Chinese firms from American exchanges if they refuse to comply with auditing standards.

Also, Reuters reported today, citing two people familiar with the matter, that Washington is mulling adding Chinese tech giants Alibaba (NYSE: BABA; HKEX: 09988) and Tencent (HKEX: 00700; OTC: TCEHY) to a so-called “investment ban” list because of their alleged links to the nation’s military.

It’s unclear how the Biden administration will handle China but some experts believe that improvement will not be quick. Chinese companies are expected to increasingly turn to Hong Kong for listings this year.

Meanwhile, trade tensions didn't stop Baidu's momentum. Its shares have surged 48% since early December.

In part, the big gains can be attributed to the company's upsizing its share repurchase program to $4.5 billion and the recent rumors of Baidu entering the electric vehicle space. The company has held preliminary talks with Geely (HKEX: 00175; OTC: GELYF), Guangzhou Automobile Group (OTC: GNZUF; HKEX: 02238), and China FAW Group Corp Ltd.’s Hongqi about the possibility, and it may form a majority-owned joint venture, as Reuters reported last month.

In early trading Thursday, the stock in Baidu was up 1%, at $206.49 per American depositary share.

According to Bloomberg, more banks could be added to Baidu’s Hong Kong deal.

Baidu was rumored to be nearing a secondary offering in Hong Kong prior to the Covid-19 outbreak, spurred by Alibaba's successful listing in November 2019; however, some setbacks that sent Baidu's stock as low as $82 per share in March 2020 and a slow recovery had delayed its plans until now.

Topics:Baidu, JD.com, Alibaba, Tencent, NetEase, Geely, Guangzhou Automobile Group.
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