Dual listing or secondary listing of Chinese concept stocks?

At a time when the time for good Chinese concept stocks to return to Hong Kong stocks has become very tight, most venture capital institutions appear to be relatively tolerant of the choice of the method of returning Chinese concept stocks to Hong Kong stocks.

So today, the editor is here to sort out the relevant knowledge about stocks. Let’s take a look! Dual listing or secondary listing? On the 26th of that good month, Alibaba Group issued an announcement stating that the board of directors has authorized the group’s management to apply to Hong Kong United

The exchange submitted an application to add Hong Kong as the main listing place.

After completing the review process on the Hong Kong Stock Exchange, Alibaba will have dual primary listings on the Main Board of the Hong Kong Stock Exchange and the New York Stock Exchange.

It is worth noting that, unlike the recently popular “secondary listing”, Alibaba chose dual listing this time.

Specifically, dual listing mainly refers to Chinese concept stocks completing the IPO process and issuing new shares to raise funds in the US and Hong Kong stock markets respectively. However, under normal circumstances, the two stocks cannot circulate with each other and there is a certain price difference.

In comparison, secondary listing refers to Chinese concept stocks listing the same type of stocks in the U.S. and Hong Kong stocks, and achieving cross-market circulation of shares through international custodians and securities brokers, and Chinese concept stocks are listed in both the U.S. and Hong Kong stocks.

The market values ??of are almost the same, and there is no so-called price difference.

The reporter found that since this year, an increasing number of Chinese concept stocks have chosen the dual listing method to list on the Hong Kong stock market, including Zhihu, Miniso, Tuya Smart, etc.

“Compared with the secondary listing process of Chinese concept stocks, which can only sell a small amount of existing stocks to seek financing, dual listing can enable Chinese concept stocks to issue new shares to raise a higher amount of funds to help business development. This is what many Chinese concept stocks particularly value.

” A partner from a large domestic venture capital institution told reporters.

Currently, they are negotiating with a number of Chinese concept stocks on specific ways to return to Hong Kong stocks.

In his view, whether it is a secondary listing or a dual listing, as long as they can return to Hong Kong stocks as soon as possible to avoid the risk of forced delisting of US stocks, they will support the final decision of the Chinese concept stock management.

The reason is that once Chinese concept stocks are forced to delist due to the policies of the U.S. Securities and Exchange Commission (SEC), the project exits of many venture capital institutions will encounter new twists and turns, which will not be conducive to the expiration and liquidation of PE fund products.

Reporters have learned from many sources that many venture capital institutions hope that large-scale Chinese concept stocks in the fields of biomedicine, e-commerce, new economy, and artificial intelligence can choose dual listing, because they hope that dual listing can significantly improve corporate valuations, so that

They achieve higher project exit returns.

Venture capital supports the return of Chinese concept stocks to Hong Kong stocks. Data shows that before June 2021, the vast majority of Chinese concept stocks will mainly choose secondary listings and privatization and relisting methods to return to Hong Kong stocks.

Especially before 2019, privatization and re-listing once became the most mainstream way for Chinese concept stocks to return to Hong Kong stocks.

"At that time, many venture capital institutions participated in the privatization of Chinese concept stocks and then listed them in Hong Kong, mainly based on valuation arbitrage considerations." An investment director of a venture capital institution who is familiar with the return of Chinese concept stocks to Hong Kong stocks told reporters.

At that time, many Chinese concept stocks faced financial doubts and their valuations plummeted, which led the company management to decide to privatize first and then list in Hong Kong.

Venture capital institutions are optimistic that the valuation of these Chinese concept stocks in the Hong Kong stock market will be significantly higher than that of the U.S. stock market, and they have invested in helping some Chinese concept stocks to complete privatization and then choose an opportunity to list in Hong Kong.

However, in his view, there are many uncertainties in the specific operation of privatization and then listing in Hong Kong. First, whether overseas shareholders of Chinese concept stocks are willing to sell their shares at a lower price requires long-term communication and consultation between all parties, which may not be possible.

The ability to reach an agreement in a short period of time has resulted in a significant delay in the privatization process; secondly, even if privatization is completed, companies must go through the IPO review process again before going public in Hong Kong, making the relevant capital operations quite complicated and cumbersome.

Since 2020, as the SEC has introduced policies that have increased the risk of forced delisting of Chinese concept stocks, secondary listing has become the first choice for many Chinese concept stocks to return to Hong Kong stocks to avoid the risk of forced delisting.

Especially after Hong Kong’s financial regulatory authorities continue to relax the entry threshold for secondary listings of Chinese concept stocks in Hong Kong, more and more Chinese concept stocks have begun to use secondary listings to seek a quick entry into the Hong Kong stock market.

Data released by the Hong Kong Stock Exchange shows that so far, about 30 Chinese concept stocks have returned to Hong Kong stocks in different forms. Among them, 17 Chinese concept stocks have chosen the "secondary listing" method, accounting for half of the total.

Many venture capital institutions pointed out that although the operation process of secondary listing is relatively fast, because the valuation of its Hong Kong stocks is consistent with that of U.S. stocks, Chinese concept stocks still have not significantly reversed the dilemma of low valuation.

A research report released by CITIC Construction Investment pointed out that between February 2021 and March 2022, affected by Sino-US relations, audit supervision of Chinese concept stocks, and delisting turmoil, the market value of more than 280 Chinese concept stocks dropped from a peak of US$2.8 trillion.

It plummeted to US$1.4 trillion, shrinking by half. Among them, the share prices of many Chinese concept stocks with outstanding performance fell by more than 60%, making the valuation of Chinese concept stocks generally undervalued.