LinkDoc becomes first Chinese firm to shelve US IPO after Beijing crackdown

LinkDoc's decision to suspend its US$211 million IPO is likely to be followed by others. PHOTO: REUTERS

HONG KONG (REUTERS) - Chinese medical data group LinkDoc Technology has shelved plans for an initial public offering (IPO) in the United States due to Beijing's clampdown on overseas listings by domestic firms, according to three sources with direct knowledge of the matter.

It is the first Chinese firm known to have pulled back from IPO plans since China's cybersecurity regulator toughened its approach to oversight last week with an investigation into ride-hailing giant Didi Global just two days after its New York debut. That was soon followed with an order for Didi's app be removed from app stores.

Beijing also said on Tuesday (July 6) it would strengthen supervision of all Chinese firms listed offshore, a sweeping regulatory shift that triggered a sell-off in US-listed Chinese stocks.

LinkDoc's decision to suspend its US$211 million (S$285.5 million) IPO, is likely to be followed by others, analysts said, although they noted that US listings were not barred per se.

"For companies applying for a US listing, they may have to wait for further clarification, stricter scrutiny and pre-approval from different regulators and authorities," said Bruce Pang, macro & strategy research head at China Renaissance Securities.

"The new rules may impose long waiting periods on any companies hoping to list abroad which will hit investor sentiment, depress valuations for IPOs in the US and make it more difficult to raise funds overseas," he said.

Backed by Alibaba Health Information Technology, LinkDoc filed for its IPO last month and was due to price its shares after the US market close on Thursday.

It had planned to sell 10.8 million shares between US$17.50 and US$19.50 each. The book closed one day earlier than planned on Wednesday, one of the three sources and a separate person said.

The sources declined to be identified as the information has not yet been made public.

LinkDoc did not immediately respond to a request for comment.

Morgan Stanley, Bank of America, and China International Capital Corp Ltd (CICC) were the investment banks on the deal. Morgan Stanley and Bank of America declined to comment, while CICC did not respond to a Reuters request for comment.

Deals in danger

US capital markets have been a lucrative source of funding for Chinese firms in the past decade, especially for technology companies looking to benchmark their valuations against listed peers there and tap an abundant liquidity pool.

So far this year, a record US$12.5 billion by Chinese firms has been raised from 34 US listings, Refinitiv data shows, well up from the US$1.9 billion from 14 deals in the same period a year ago.

Eight Chinese companies including home service platform Daojia Ltd and Atour Lifestyle Holdings have made public filings with the Securities and Exchange Commission (SEC) to list in the US later this year, a review of the filings showed.

The tougher stance by the Cybersecurity Administration of China has been driven in part by concerns that the United States could gain greater access to data owned by Chinese firms - similar to concerns that the previous Trump administration had voiced about Chinese firms operating in the United States.

In May, Reuters reported that Beijing was pressing audio platform Ximalaya to drop US listing plans and opt for Hong Kong instead, with one source at the time citing Beijing's concerns that US regulators will potentially gain more access to audit documents of New York-listed Chinese companies.

Analysts also note the tougher stance coincides with new US regulations being rolled out that could see Chinese companies delisted if they do not comply with US auditing rules.

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