Chinese tech group’s Nasdaq IPO signals revival for offshore listings

A Shanghai-based maker of sensors for cars has become the largest Chinese group to go public in the US since 2021, in a deal that exchange executives hope will ease almost two years of tensions during which such listings ground to a halt.

Hesai Technology, which supplies laser-based sensors to carmakers and autonomous driving companies, on Wednesday raised $190mn from investors — more than it had originally planned — in an initial public offering on the Nasdaq stock exchange that valued it at around $2.4bn.

Bob McCooey, Asia-Pacific chair at Nasdaq, said he was hopeful the deal would be a “seminal” event after a series of positive developments in recent months “cleared the dark clouds [that] hung over the US capital markets for Chinese companies”.

More than 200 Chinese companies worth a combined $1tn are listed on US exchanges, according to the US-China Economic and Security Review Commission, a group created by Congress to examine the national security implications of trade and economic relations between the two countries.

China became the dominant source of foreign listings in the US in recent years and a lucrative font of income for US exchanges, but rising political tensions, regulatory disputes and the disastrous $4.4bn listing of ride-hailing group Didi Chuxing brought an abrupt end to the trend in 2021.

Didi was forced to delist less than 12 months after it made its debut on the New York Stock Exchange, amid a string of Chinese regulatory probes that saddled investors with billions of dollars in losses.

A stand-off between Beijing and Washington over the inspection of Chinese companies’ audits also threatened hundreds of companies with being forcibly delisted, but a breakthrough was reached last December.

Hesai becomes the first Chinese company to raise more than $100mn in the US since October 2021, according to Dealogic data, and the largest Chinese technology group to list in New York since Didi.

The deal also marks the return of some of the largest western banks to US-China deals, with Goldman Sachs, Morgan Stanley and Credit Suisse all underwriting their first deal since 2021, according to Dealogic.

“With three of the major players in the Asia region all on this IPO, I think that bodes well,” McCooey said.

He said he was hopeful that the renewed regulatory clarity and recent improvement in equities prices created “an opportunity for a deep pipeline [of IPO candidates] that has existed since before the middle of 2021 and [that] has continued to grow”.

The Nasdaq Golden Dragon Index, which tracks shares in US-listed Chinese companies, has risen 66 per cent since the end of October, buoyed by the apparent end of the delisting threat and China’s re-emergence from its zero-Covid strategy.

There are unlikely to be many further deals in the first quarter, as next Tuesday marks the last day for companies to go public without providing updated financial figures, but McCooey predicted “you’ll see more coming in the second quarter and as the year progresses”.

The Financial Times reported last month that Shein, the Chinese fast-fashion behemoth, expects to list in the US as early as this year.

Still, while the outlook is improving, some remain cautious. “I think we’ll see some smaller and midsized [deals], but for the larger ones . . . they would need to have a very compelling reason not to list in Hong Kong . . . [and] would have to make sure they have a strong understanding of what the government sentiment is” to avoid a repeat of the Didi fiasco, said a trader who works on IPOs.

Hesai’s prospectus also warned that though the US audit regulator’s threat of delisting has been lifted for now, it will need to make the same decision each year in future. The company also noted that during preparations for the listing it suffered from a “lack of sufficient skilled staff” with knowledge of US accounting requirements.

Describing itself as the “global leader” in lidar technology, which is used for driver-assistance systems such as parking sensors as well as more advanced fully autonomous vehicles, Hesai reported revenues of Rmb793mn ($112mn) in the first nine months of 2022 and a net loss of Rmb165mn.

Its current shareholders include Chinese internet group Baidu, China-focused venture firm Lightspeed and German auto-parts specialist Bosch.