In back-to-back homecoming listings in Hong Kong, search engine operator Baidu and video streaming provider Bilibili raised HK$23.9 billion (US$3.1 billion) and HK$20.2 billion, respectively. While Baidu started trading on 23 March, Bilibili debuted six days later.
The two listings mark a continuation of a secondary listing trend since Alibaba’s US$11.2 billion offering in November 2019.
“The homecoming of these Chinese stocks reflects a need for companies to create multiple financing channels. Through the secondary listings, companies can not only raise funds, but also reduce the risks of financing,” said Fu Siqi, a partner at Tian Yuan Law Firm, the PRC legal counsel on the Bilibili listing.
“The economic and trade frictions between the US and China in recent years have made investors more worried. That led to a decline in the valuation of many Chinese companies listed in the US, which has adversely affected the financing,” said Fu.
The trend of overseas-traded Chinese companies turning to Hong Kong gathered pace in 2020, with a total of US$6.6 billion raised from secondary listings by e-commerce company JD.com and online technology company NetEase in July. The Baidu listing is the largest such offering since JD raised US$3.9 billion.
Fu added, “The previous homecomings have paved the way for Chinese stocks to list in Hong Kong. The stock exchange has also formulated new listing rules to regulate secondary listings in the city, with clearer requirements, exemptions and simplification of rules to make the secondary listings faster and more convenient.”
Fu said that domestic investors are more familiar with these companies, especially the larger and better performing ones, and this means they can not only obtain higher valuations, but also reduce the cost of issuance and financing.
Bilibili shares fell 1% on their first day of trading but soon regained the losses and rallied to HK$835 apiece, up 3.3%. Baidu closed flat on its Hong Kong debut, and had lost 13.6% to close at HK$217.60 on 8 April.
Baidu’s founder, Robin Li, has said the company will shift focus to its artificial intelligence business. “Returning to Hong Kong for a second IPO is another chance for Baidu,” Li was quoted as saying at the company’s Hong Kong opening ceremony.
According to its prospectus, Baidu owned the largest number of AI patents and patent applications in China as of 31 October 2020. The company also plans to spend half of the proceeds on commercialising its AI-based innovations, ranging from smart driving to AI chips.
For Baidu, Skadden provided Hong Kong and US legal advice, King & Wood Mallesons acted as its PRC counsel, and Maples Group was its Cayman Islands counsel. Davis Polk acted as Hong Kong and US legal counsel to the joint sponsors and underwriters, and Haiwen & Partners acted as the PRC counsel.
Skadden was the Hong Kong and US legal counsel for Bilibili, and Walkers acted as its Cayman Islands counsel. AnJie Law Firm was the special legal adviser to Bilibili as to PRC laws. Clifford Chance acted as Hong Kong and US legal counsel for the sponsor and underwriters, and Commerce & Finance Law Offices acted as PRC counsel.