Global performance of IPOs in China's TMT industry remained robust for the first half of 2021

Hong Kong has become a popular market for secondary listings of China concept stocks

PwC today released data on initial public offerings (IPOs) of Chinese Technology, Media and Telecommunications (TMT) companies in the first half of 2021. Over the first half of the year, there were 78 IPOs from mainland TMT enterprises, marking a drop from the 109 recorded in the second half of 2020. The total amount of financing for the 78 listings reached approximately RMB 213.8 billion. The largest IPO of a mainland TMT company in the first half of 2021 was by Kuaishou Technology, which raised around HKD 48.3 billion in Hong Kong.

Jianbin Gao, PwC Mainland China TMT Industry Leader stated: “In the first half of 2021, the momentum of mainland TMT companies listing on the STAR Market and the ChiNext Market slowed down. However, mainland TMT companies continued its strong performance in the global capital market, driven by the listing of Chinese enterprises in the United States and the return of China concept stocks to the Hong Kong capital market.”

In the first half of 2021, Hong Kong and overseas capital markets became popular options for mainland TMT enterprises intending to list. 34 mainland TMT enterprises, representing 44% of the overall number, chose to list in Hong Kong and overseas. They raised about RMB 175.8 billion, accounting for 82% of the total financing. Another 28% and 22% of mainland TMT enterprises elected to list on the STAR Market and the ChiNext Market in Shenzhen, respectively. There were 22 TMT industry IPOs on the STAR Market that recorded financing of almost RMB 23.4 billion, accounting for 11% of the total financing. A further 17 TMT IPOs on the ChiNext Market in Shenzhen, garnered RMB 12.1 billion, representing 6% of the total financing. A further five TMT industry IPOs on the main board had raised approximately RMB 2.4 billion, reflecting 2% of total financing.

Reviewed by sector, in the first half of 2021, the software and service industry saw 44 listings, accounting for 56% of TMT IPOs. Over the same period, there were 32 IPOs in the technology hardware and equipment industry, making up 41% of listings. There were also 2 listings from the media industry, comprising 3% of TMT IPOs.

Hong Kong and overseas markets are more receptive of enterprises that have not yet turned a profit. Notably, 18 of the 34 TMT companies that listed in Hong Kong and overseas in the first half of 2021 were loss making at the time of listing.

With the exception of companies listed on the STAR Market, the average price-earnings (P/E) ratio of A-share listed TMT companies was lower at the end of June 2021 than it had been at the end of the previous period. Despite the average P/E ratio of A-share TMT companies decreasing from 49 times on December 31, 2020 to 44 times on June 30, 2021, this is still performing at a high level.

As of June 30, 2021, among the enterprises listed on the STAR Market, 108 TMT companies had a total financing amount of RMB 179.3 billion, an average financing amount of RMB 1.66 billion, and an average initial P/E ratio of 57 times.

Since the listing of the first batch of companies under the ChiNext registration system on August 24, 2020, 148 companies have listed on the index generating a total financing of RMB 118.8 billion and an average financing amount of RMB 802 million. The average initial P/E ratio was 30 times. This included 34 TMT companies raising a total of RMB 27.4 billion which is an average financing amount of RMB 806 million and an average initial P/E ratio of 34 times.

Jianbin Gao noted: “The STAR Market is being refined and improved continuously. Indicators for evaluating scientific innovation have been further clarified with the release of the ‘Interim Provisions’. In the second half of 2021, core science and technology enterprises with advanced technology will remain the focus of STAR Market listings. In addition, the scale of enterprises listed under the ChiNext registration system is constantly expanding. With ongoing enhancement and implementation of the registration system, listings and issuance through the ChiNext registration system will remain active. Concurrently, an impending reunion of the three major telecom operators to the A-share market indicates that the mainland market will open a window for the development of larger TMT enterprises.”

In the first half of 2021, four TMT enterprises selected Hong Kong for secondary listings which would raise a combined RMB 52.9 billion, accounting for 25% of the total financing of TMT IPOs in the first half of the year.

Wilson Chow, PwC Global TMT Industry Leader, said: “The passing of the final draft of the Holding Foreign Companies Accountable Act has increased the difficulty and uncertainty of Chinese enterprises listing in the United States. At the same time, the release of the Network Security Review Measures by the Cyberspace Administration of China as well as added requirements for the information disclosure of Chinese enterprises listing in the United States by the U.S. Securities and Exchange Commission will further slow down the pace of Chinese enterprises listing in the United States. A series of measures issued by Chinese and American regulators on the listing of Chinese enterprises in the United States have paved the way for mainland Chinese enterprises to list in Hong Kong. The appeal of the Hong Kong IPO market for China concept stocks is anticipated to keep growing over the second half of 2021.”