Meihua International Medical Technologies is poised to become the first Chinese company to list in the US in nearly seven months. A successful IPO could lay the groundwork for other Chinese issuers after a regulatory crackdown by Beijing froze out mainland-based companies.
The Jiangsu province-based disposable medical-device maker is expected to price its IPO this week, according to the New York Stock Exchange website. Meihua is seeking to raise about US$57.5 million on Nasdaq from the sale of five million shares in a range from US$9 to US$11. It will trade under the symbol “MHUA”.
There is an overallotment option of 750,000 shares in case of strong demand. Meihua submitted its first draft IPO registration to the US Securities and Exchange Commission in December 2020.
Chinese companies had stayed away from New York since July, as they were caught between China’s regulatory clampdown and closer scrutiny by the US SEC on Chinese companies seeking to raise funds on Wall Street.
Other Firms
At least six Chinese companies have lodged documents for New York listings in recent weeks, filings showed. It promising an end to a months-long freeze after an unprecedented clampdown last year by Chinese regulators.
However, the plans are for initial public offerings (IPOs) of small size, ranging from $1 million to $35 million. They are unlikely to trigger a slew of sizeable debuts soon. As companies await more clarity on new offshore listing rules, bankers said.
Some smaller Chinese companies are now reviving efforts to sell shares in the United States. They were confident, are not targeted by the new rules seeking to block offshore listings by firms handling large amounts of data or posing national security risks.
The US Securities and Exchange Commission has stepped up its supervision of Chinese companies listed overseas. It includes reviews of their cybersecurity.
SEC Chair Gary Gensler is especially critical of Chinese businesses that use shell companies to get around Chinese rules blocking foreign ownership for their industries.
Under these deals, the Chinese business forms a shell company in the Cayman Islands or somewhere else. The shell company then sells its stock to investors after listing in New York.
The shell company has no ownership of the Chinese company. Instead, it has service contracts with it. These arrangements are called variable interest entities, or “VIEs.”
“I worry that average investors may not realize that they hold stock in a shell company rather than a China-based operating company,” Gensler said.
“I think both US and Chinese regulators hope legitimate, law-abiding companies like us can grow bigger and stronger through listings,” Zhang Jiulin, chairman of insurance broker Hengguang Holding Co.
REGULATORY GESTURE
Chinese applicants, among which are software maker U-BX Technology and electronic components maker Ostin Technology Group. They were enthused by positive signals recently from Chinese and U.S. regulators about such deals, company executives said.
We have seen some positive gestures from the CSRC,” Hengguang’s Zhang said.
China and the United States are making progress in coordinating regulations governing Chinese companies listed in New York. CSRC Vice Chairman Fang Xinghai told foreign financial institutions at a meeting last month.
“For a small-cap like us, I don’t think China’s new rules will have a big impact,” said Ling Tao, chairman of Austin. Which hopes to raise up to $15 million via a Nasdaq listing in March.
“Market participants are seeing the light at the end of the tunnel,” said Ming Liao, founding partner of private equity firm Prospect Avenue Capital.
However, China needs robust market-friendly policies to fully revive U.S. listings, he added.
