Wall Street was geared up to swallow up LinkDoc’s IPO but intervention from Beijing has pushed it back to the disappointment of many.
LinkDoc Technology has decided to delay its plans for a market debut in the U.S. after Beijing’s crackdown on overseas listings of Chinese-owned companies. The firm is the first known Chinese company to have pulled out of its IPO plans after ride-hailing company DiDi Global (NYSE: DIDI) was investigated two days following its market debut on Wall Street.
What is LinkDoc Technology?
LinkdDoc is an oncology big data company based in Beijing that offers big data, AI assistant systems, patient management, along with many other services.
The medical data group is backed by Alibaba Health Information Technology.
Chinese tech sell-off
The Chinese cybersecurity regulator shocked people when it ordered DiDi to remove its app from app stores. Then, on Tuesday, Beijing stated that it was going to heighten its supervision of any Chinese companies that listed offshore. As a result, there was a significant sell-off of U.S.-listed Chinese stocks, with Tencent Music Entertainment stock dropping over 9% on Tuesday, while JD.com, Trip.com (NASDAQ: TRIP), and Alibaba shares also slid.
While China has not banned any firm from listing in the U.S., it is expected that many other companies who were hoping to go public in the states might also suspend their debuts to avoid scrutiny.
LinkDoc calls off U.S. IPO
The decision to postpone would have been a hard one for LinkDoc to make, given that its IPO was valued at $211 million. LinkDoc was predicted to go public on Friday and was expected to sell 10.8 million shares priced between $17.50 and $19.50 each.
Macro and strategy research head at China Renaissance Securities, Bruce Pang, explained:
“For companies applying for a U.S. listing, they may have to wait for further clarification, stricter scrutiny and pre-approval from different regulators and authorities.”
He also added that new rules might result in long waiting times for companies to list abroad which might hinder investment interest in the stocks, decrease valuations, and make it harder to raise capital. According to reports, China is worried about what the U.S. will do with any data it collects from listing these companies. These claims over data privacy are very similar to the concerns former President Donald Trump expressed over Chinese companies coming to the U.S. and were the basis of why he tried to ban Chinese-owned TikTok from the country.
Over the past decade, U.S. markets have represented a highly lucrative avenue for funding for Chinese companies. Within the last six months, an eye-popping $12.5 billion has been fundraised by Chinese stocks from 34 listings in the States. This is a massive increase from the $1.9 billion raised in the first half of 2020.
Are Chinese stocks still a good investment?
Chinese stocks have been very popular with American investors and have provided great returns. However, if companies continue to come under fire from the government in their home country, shareholders will be encouraged to sell shares due to uncertainty of the future of the stock.
Wall Street will be keeping a close eye on the developments in China as it could mean many exciting, innovative tech companies will be prevented from making a U.S market debut.
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.