BCO315 – Corporate Finance (3CH/4ECTS) Task 2.2 Case Study 2: DIDI'S IPO WAS A DISASTER. HERE'S WHY CHINESE COMPANIES K

[answerhappygod]

BCO315 – Corporate Finance (3CH/4ECTS)
Task 2.2
Case Study 2: DIDI'S IPO WAS A DISASTER.
HERE'S WHY CHINESE COMPANIES KEEP LISTING IN THE US
On Tuesday, shares in Didi crashed 20% after Chinese authorities
opened an investigation into the ride- hailing giant that raised
$4.4 billion last week in a massive IPO in New York.
The botched IPO is bad news for investors. It's also bad for the
New York Stock Exchange, which has been caught up in a campaign by
US politicians who want to prevent Chinese companies from raising
money in New York.
The political fallout was swift. Sen. Marco Rubio, a Republican
from Florida who is highly critical of the Chinese government, told
the Financial Times that it was "reckless and irresponsible" for
Didi to be allowed to sell shares.
"Even if the stock rebounds, American investors still have no
insight into the company's financial strength because the Chinese
Communist party block US regulators from reviewing the books,"
Rubio told the UK newspaper. "That puts the investments of American
retirees at risk and funnels desperately needed US dollars into
Beijing."
The political atmosphere around listings of US companies has
been charged for months. Former President Donald Trump signed a law
in November that bans Americans from investing in firms that the US
government suspects are either owned or controlled by the Chinese
military.
That forced US exchanges to delist several Chinese companies,
including China Mobile, China Telecom and China Unicom. President
Joe Biden has followed the same path, expanding restrictions on US
investment into Chinese companies with suspected military ties.
The big question: Given the political backdrop, why do Chinese
companies continue to pursue US listings? Analysts say there are
several advantages to listing in New York:
Superior liquidity
A massive investor base Streamlined listing process
For Chinese tech companies, a US listing is even more attractive
because American investors are used to dealing with startups. And
US exchanges accept a wider range of valuation methodologies.
Hong Kong has tried to steal business from New York in recent
years, encouraging Chinese companies to sell shares in the city in
what have been dubbed "homecoming listings."
But the pull of New York is strong. According to Jefferies, 10
Chinese companies completed US IPOs in 2020, representing over 20%
of the market excluding SPACs — the highest percentage of
US IPO issuance since 2010.
Didi was a continuation of that trend. It was the biggest US IPO
by a Chinese company since Alibaba's debut in 2014.
End of an era? Pressure is not just coming from the United
States. On Tuesday, China said it would increase regulation of
overseas-listed companies, heaping additional pressure on Didi.
The government said it will severely punish illegal securities
activities, including fraudulent share issuance, embezzlement and
market manipulation. It said securities fraud was prominent in
overseas markets.
This article is accessible
from: https://cnnphilippines.com/business/202 ... ter.-Here-
s-why-Chinese-companies-keep-listing-in-the-US-.html
REQUIRED:
you have to provide your views on the above article, evaluating
the strategy mentioned in terms of an IPO / listing in an
international market.