HONG KONG -- At least four Chinese technology companies, including e-retailer JD.com and search engine Baidu, are considering a secondary listing in Hong Kong that could collectively raise as much as $15 billion, as U.S.-listed Chinese companies seek to follow Alibaba's successful listing and move closer to home, four people familiar with the discussions said.
The companies' plans are at an early stage and they are still holding talks with investment banks including Goldman Sachs, Credit Suisse, Bank of America and China International Capital Corp, to act as their arrangers for the potential fund-raisings, the people said.
They expect the pace of talks to accelerate after the Lunar New Year holiday ends on Jan. 27, with some of the listings happening in the first half of the year, subject to market conditions. The other U.S.-listed Chinese companies considering a secondary listing in Hong Kong are online travel company Ctrip, online services company NetEase and restaurant operator Yum China.
The plans of these companies, which have a combined market capitalization in the U.S. of over $190 billion, follows from Alibaba's heavily oversubscribed $12.9 billion secondary listing in November, the world's largest. It also comes as the U.S. and China prepare to sign a phase one trade deal on Wednesday.
JD.com, Baidu and NetEase declined to comment on their secondary listing plans while Yum China and Ctrip did not immediately respond to a request for comment. All of the Chinese tech companies are listed on Nasdaq; Yum China is listed on the New York Stock Exchange.
Bankers began wooing U.S.-listed Chinese companies after Alibaba Group Holding's sellout listing in Hong Kong. As many as 27 Chinese companies, with a combined market capitalization of almost $400 billion, have been in bankers' sights, the Nikkei Asian Review calculated in December.
While Chinese tech companies have long sought the prestige and access to capital that come from deep markets such as the New York Stock Exchange and Nasdaq, Chinese companies are considering a secondary Hong Kong listing as Beijing is encouraging them to return home and burnish the reputation of local exchanges -- not least in Hong Kong where the economy is reeling after months of anti-government protests.
Among the attractions of a Hong Kong listing are the allure of an active local investor base combined with fears that Washington might eventually force Chinese companies to delist in the U.S. amid the two countries' rivalry for global tech supremacy and any ongoing trade dispute.
The companies are also eyeing Hong Kong after its stock exchange changed rules in 2018 that allowed tech companies with dual-class shares or weighted voting rights to float.
Charles Li, chief executive of Hong Kong's bourse, said last week he foresaw more U.S.-listed Chinese companies wanting to list as it would bring them closer to their home base and also the vast majority of their customers.
"I think just by their nature they will come. They will potentially get a better valuation re-rate [as their] customers know [their] business and [may] want to become a shareholder," he said. "A different shareholder base [also] means that you are hedged because the Chinese... look at the world very differently from western investors."
Alibaba shares closed at HK$223.60 in Hong Kong, up 27% from its issue price of $176, and the highest level since it listed on Nov. 26. Mainland companies, emboldened by Alibaba's success and a possible truce in the China-U.S. trade war, have been more receptive to Hong Kong pitches compared to early 2019, two of the people said.
The companies are yet to mandate sponsors for the secondary offering, the people said. Once they sign up with investment banks, they will need to file a confidential prospectus with the Hong Kong Stock Exchange, and schedule a sitting with its listing committee for approval. Once they receive that, investor road shows begin.
These steps could take between two and four months. Market conditions would also need to be favorable for the listings to go ahead, one person said.
Additional reporting by Coco Liu