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Segway owner's IPO success opens new path for Chinese listings

Ninebot shares gain as much as 163% in debut on STAR Market

Ninebot President Wang Ye unveils the semi-autonomous scooter KickScooter T60 at a product launch event in Beijing last year.   © Reuters

HONG KONG -- Ninebot, owner of the Segway scooter brand, soared in its debut on Shanghai's STAR Market on Thursday, heralding a new path to listing for Chinese companies.

The Chinese depositary receipts of Ninebot, the first-ever issued in China, surged as much as 163% following the company's 1.33 billion yuan ($197.9 million) initial public offering.

CDRs are similar to American depositary receipts, a share structure that has allowed companies such as Alibaba Group Holding to raise capital on U.S. exchanges. Chinese authorities announced plans in early 2018 to allow CDRs as a means of letting overseas-incorporated companies sell shares at home and also to lure back major foreign-listed Chinese tech companies such as Alibaba and Baidu.

"The Ninebot CDR listing may start a flood of new-style listings back into China," said market analyst Fraser Howie, co-author of the book "Red Capitalism: The Fragile Financial Foundation of China's Extraordinary Rise," noting that many Chinese tech companies are incorporated in the Cayman Islands.

"They now have the ability to incorporate overseas but still list back home at potentially much higher valuations," he said.

Ninebot sold 70.4 million CDRs at 18.94 yuan each in its IPO. They closed at 38.50 yuan a share on Thursday, double their offering price, while China's CSI 300 index edged up 0.75%.

The STAR board does not cap price moves during a newly listed company's first five days of trading, compared with a 44% initial limit on Shanghai's main board. After that, individual stocks on the STAR Market can move up to 20% up or down each day compared with 10% for the main board.

Ninebot's offering drew orders for 2,502 times the number of shares on offer. Ten CDRs represent one ordinary share in the Cayman Island-registered company, according to the company's prospectus.

"The first CDR listing fits into a pattern of unprecedented openness within the Chinese capital markets," Howie said.

The launch of the STAR Market with relaxed rules on listings and trading and the removal of restrictions on foreign institutional investors have dramatically changed the investment environment over the past year or so. China Securities Regulatory Commission Vice Chairman Fang Xinghai said last month that plans are afoot to further widen the scope of investments allowed in the cross-border Stock Connect program link with Hong Kong to permit foreign investors to trade more commodities futures.

Smartphone maker Xiaomi, which is a shareholder in Ninebot, filed for the first CDR listing in 2018 but later withdrew its application while going ahead with an IPO in Hong Kong.

Ninebot, which acquired two-wheeled personal transporter maker Segway in 2015, plans to use proceeds from its STAR listing for smart-car and robot projects as well as for working capital and building a research center. China's securities regulator approved its IPO plan in September.

Some analysts, including Hong Kong-based investment banking consultant Philippe Espinasse, cautioned that additional successful listings would be required in order to turn CDRs into a "game changer" for homecoming offerings.

However, others are more optimistic.

"The subscription levels and the opening is a vote of confidence for such structures," the markets head of a global bank told Nikkei Asia. "It gives us the ammunition to pitch similar transactions to our clients who are either looking to newly list or are planning a secondary listing."

New York-listed Chinese companies are considering Hong Kong as a possible secondary listing destination amid moves by U.S. regulators and legislators to push out Chinese companies by January 2022 unless they open their books to American auditors. Chinese companies have declined to do so, citing domestic laws that ban such access on the grounds that the statements could contain state secrets.

More than 350 companies of Chinese origin have listed in the U.S. since 1993. More than 100 have delisted since then, but the rest may either have to seek an alternative at home or delist. Only a tenth of the companies will qualify for a secondary listing under current Hong Kong Stock Exchange rules and CDRs can be an option, the banker said.

Nasdaq-listed data-center operator GDS Holdings has raised $1.67 billion in a secondary listing in Hong Kong and will make its debut on Monday. Meanwhile, NYSE-listed New Oriental Education & Technology is seeking $1.54 billion in a secondary listing in the city.

Companies also have continued to tap U.S. markets. Ping An Insurance Group-backed online wealth-management portal Lufax closed its books on Wednesday for an up to $2.36 billion IPO on the NYSE. It will begin trading on Friday.

Additional reporting by Zach Coleman in Hong Kong.

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