The number of IPOs of Chinese mainland TMT companies increased significantly to 109, raising approximately RMB 249.6 billion in financing, according to a report from global accounting firm PwC. On February 25, 2021, PwC released the data on initial public offerings (IPOs) of Chinese Technology, Media and Telecommunications (TMT) companies in the second half of 2020.

According to the report, in 2020, the number of IPOs of Chinese mainland TMT companies totaled 164, a nearly 58% increase when compared to 2019. A total of RMB 346.8 billion in financing was raised, which nearly doubles that of 2019. Among Chinese mainland TMT companies that had the largest financing in the second half were Semiconductor Manufacturing International Corporation (SMIC), listed on the STAR market (approximately RMB 53.2 billion in financing), and JD Health Co., Ltd. (approximately RMB 26.1 billion in financing) listed in Hong Kong.

Jianbin Gao, TMT industry leader for the Chinese mainland at PwC said, "In the second half of 2020, driven by the implementation of the registration-based system of the STAR market and Shenzhen’s ChiNext, as well as an active capital markets in the United States and China's Hong Kong, the upward trend of IPOs of Chinese mainland TMT companies remained strong. As companies such as Kuaishou will be listed in Hong Kong in early 2021, coupled with the steady development of the Science and Technology Innovation Board and the Growth Enterprise market, we expect that 2021 will be a big year for IPOs of TMT companies, with the possibility of setting new highs in both A-shares and overseas markets."

In the second half of 2020, the STAR market has become the main listing platform for TMT companies in the Chinese mainland that saw a total of 37 enterprises list, of which 34% are Chinese mainland TMT companies. The listing generated an RMB 95.7 billion in financing. Another 30 Chinese mainland TMT companies listed in Hong Kong and overseas, accounting for 28%, and approximately RMB 125.9 billion in financing. Shenzhen’s ChiNext had 24 IPOs in the TMT industry, accounting for 22%, and financing of about RMB 18.1 billion. There were 7 listings on the main exchange, accounting for 6%, and financing of about RMB 3.4 billion. There were 11 listings on Shenzhen SME Board, accounting for 10%, and financing amount was about RMB 6.5 billion.

Financial data analysis showed that there were 61 IPOs in the technology hardware and equipment industry (including 11 in the semiconductor industry), accounting for 56% of the total. The software and service industry had 43 listings, accounting for 39%; and the media industry had five listings, accounting for 5%. The scale of the proceeds of two software and service TMT companies, Shanghai Lujiazui International Financial Asset Exchange (Lufax; LU) and KE Holdings Inc (BEKE), far exceeded that of other companies listed during the same period, resulting in higher average proceeds for listed companies in the software and service sector.

The listing policies in Hong Kong and overseas markets are more accepting of unprofitable companies to go public with losses, and the launch of the STAR market also provides opportunities for loss-making companies to go public. The second half of 2020 saw 11 of the 30 TMT companies listed in Hong Kong and overseas have yet to reach profitability. However, the profit scale of the NYSE-listed Lufax far exceeded that of other companies listed in the same period, resulting in higher average net profit for Hong Kong and overseas listed companies. Three companies listed on the STAR market in the second half of 2020 were not profit-making. Meanwhile, the liberalisation of listing indicators in the STAR Market's listing rules creates new opportunities for loss-making companies with R&D capabilities.

"The deepening of the registration-based system reform of the ChiNext will promote the development of other sectors of the domestic financial market. The domestic capital market will continue to be a listing hot spot for TMT companies in 2021." Wilson Chow, PwC Global TMT Industry Leader, shared his outlook, "The Hong Kong market will continue to be the first choice for Chinese concept stocks pursuing secondary listings. At the same time, the amendments to the Hong Kong stock exchange listing rules in 2018 will increasingly reflect the exchange's advantages as a global listing venue."

Wilson Chow added, "In 2020, the listing of Chinese concept stocks in the United States had a strong momentum. The implementation of the ‘Foreign Company Accountability Act’ will increase the difficulty and uncertainty of Chinese companies' listing in the United States, but in the short term, it will not dampen demand or attractiveness of Chinese concept stocks listing in the United States. The act will encourage Chinese concept stocks to seek a secondary listing in Hong Kong or overseas."

Reported by Olivia & Monica