When it comes to options for companies considering joining a public exchange, more and more are considering a listing in one of the thriving economies of Asia.
In order to understand the driving forces, opportunities, and challenges in the US IPO market in 2018, Toppan Vintage commissioned Mergermarket to interview leading experts in the field.
Toppan Vintage question: The global share of IPOs in the Asia-Pacific region has risen sharply in recent years. Some U.S.-based companies are even listing on exchanges in Hong Kong, South Korea and Australia, such as game developer Razer in 2017. What is driving demand for public offerings in Asia? Leading deal experts weigh in...
Patrick Schultheis, Partner, Wilson Sonsini, Goodrich & Rosati weighs in: We’ve seen a lot of progress in the size, stability and liquidity of various markets, particularly in Asia. The Hong Kong market, for example, has demonstrated increasing levels of liquidity and stability, and it’s a good place particularly for companies with a focus in Asia to access the capital markets. The quality of the companies that are going public there has become higher. They're not raw, early-stage companies, but companies of all sizes that think they can get what they need in the Hong Kong market.
There is more frequent talk about North American companies listing in Asia now as well. Many of them are looking for a hook to enter these markets, which could be a variety of factors, such as basing a significant part of the company's operations in China, or in Southeast Asia. There are also companies based in Seattle or San Jose that may have big operations, or R&D, or a large customer base in China. Perhaps they want a listing on the Hong Kong stock exchange, for
example, to raise their profile among prospective customers.
Alex Wellins, Co-founder and Managing Director, The Blueshirt Group says: Asia has a considerable amount of investable finances and there are a number of very well-financed, high-networth individuals and funds in Asia. We believe that those funds are looking to diversify instead of keeping all of the investment in China. We also think that the composition of the Asian indexes is diversifying and expanding beyond the typical, historical, hard asset plays like real estate and financial services, which have usually dominated the makeup of the indices. Therefore, we believe that Asian investors are looking
for opportunities, and issuers are taking advantage of those dynamics and potentially looking to list in Asia. We also think that Asian investors are looking for high-quality companies, and a number of the US-domiciled companies fit that profile. I think there's a lot of comfort among Asian investors in investing in those companies. Those are some of the dynamics that may be driving that.
Elizabeth Lim, Senior Analyst and Research Editor, Mergermarket adds: Asia has really emerged in the last couple of years as a hot market, with many domestic investors with a lot of cash in need of investment. As US regulators such as CFIUS have clamped down on Chinese companies’ bids for US firms, particularly in the tech industry, and the Chinese government has enacted rules on capital leaving the country, exchanges based in Asia-Pacific overall have benefitted from some newfound attention as a way of raising and investing capital for regional players. Further, much of the IPO activity in APAC is being driven by China, which has reformed its approval process, allowing companies to list sooner than previously.