Chinese tech firm's 890 per cent debut on Nasdaq underlines appetite for IPOs amid China's efforts to defuse audit, delisting tensions
Ostin Technology, a low-key technology company, made an electrifying debut as the first Chinese stock offering in the US since February, underlining strong appetite even as regulatory officials remained at odds over audit and delisting issues.
The supplier of display modules and polarisers soared 892 per cent on Nasdaq to US$39.66 on Wednesday, giving it market value of US$535.4 million. The company raised US$13.5 million in gross proceeds by selling 3.38 million shares at US$4 each.
Ostin's factories in Nanjing, a mainland city in eastern Jiangsu province, produce display parts used in consumer electronics, outdoor LCD displays, and automotive panel displays.
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The first Chinese IPO since Meihua International Medical Technologies' listing in mid-February shows Chinese firms are still eager to tap the world's biggest capital market, as China voiced support for such fundraising. Fears of mass delisting of US-listed Chinese stocks, with an estimated US$1.3 trillion of market capitalisation, have fanned an exodus to Hong Kong and weighed on local equity markets.
A worked in an Ostin Technology facility. Photo: Handout alt=A worked in an Ostin Technology facility. Photo: Handout>
The China Securities Regulatory Commission (CSRC) this month said a series of weekly bilateral discussions among regulators on the auditing hurdles have progressed smoothly. Its vice-chairman Fang Xinghai said he is confident that the uncertainty will be addressed soon, according to Chinese media.
Beijing has shown willingness to make changes, as the CSRC on April 2 withdrew a requirement that only Chinese regulators conduct on-site audit inspections of Chinese companies listed overseas. China denies access to the US's Public Company Accounting Oversight Board (PCAOB), citing state secret concerns among others. The new rules also require listed companies and their accountants to decide what is sensitive information and what cannot be handed over to US regulators.
The Holding Foreign Companies Accountable Act (HFCAA), enacted during the twilight of Donald Trump's administration, requires US-listed foreign companies to comply with audit inspection under the PCAOB rules, or face expulsion from US exchanges after three consecutive years of non-compliance.
So far the US Securities and Exchange Commission (SEC) has identified companies including Baidu, Futu Holdings, iQiyi, Hutchmed, Yum China Holdings, Zai Lab, BeiGene, and ACM Research as Chinese companies liable to the law. The SEC has said it will identify a total of 270 liable companies globally.
Despite Ostin's auspicious debut and positive signs in the discussions between the US and China, companies will remain cautious about listings in the US, according to Gary Ching, Hong Kong-based chief analyst for macroeconomic and strategy at Guosen Securities.
"The first-day performance of an individual stock depends on its fundamentals and technical aspects, but its relation to the big picture outlook is limited," he said. "It is likely to enhance investor confidence if this stock continues to rise, say for a week." However, Chinese corporations will not be encouraged to increase their listings in the US until more solid results from the negotiations between Chinese and US regulators are announced.
"Chinese companies will prefer a listing in the mainland in the short term, or in Hong Kong if they want to attract offshore investors," Ching added.
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