China’s search giant Baidu might be the first overseas-listed Chinese tech company to relist at home. According to local media Caixin citing people familiar with the matter, Baidu is running ahead of Alibaba and JD in the preparation for CDR (Chinese Depository Receipt) issuance application.
Baidu has reportedly picked CITIC, the largest securities company in China, as well as Huatai United Securities, as sponsors for the planned deposit offering.
Last week, China paved a way to bring some of its most valuable tech companies to domestic stock exchanges. Regulators in the country introduced CDR trial rules which allow secondary listings of the likes of Baidu, Alibaba, and Tencent at home.
CDR is a financial certificate modeled after American Depositary Receipts issued by a Chinese bank, representing a foreign-listed company’s publicly traded securities which could be traded on a mainland exchange.
“Any time that policies allow Baidu to return, we definitely hope to return to the domestic share market as early as possible,” Baidu CEO Robin Li expressed his support for the CDR policy in an interview that took place in March, “It has always been our hope to list as a whole on the mainland, because our primary users and primary market are all in China. It would be ideal if our primary shareholders could be too.”
The size of the Baidu’s CDR issuance is yet to be disclosed, but as per a report by a local media citing a source, it won’t be huge, as the company’s primary listing venue is still Nasdaq instead of China. Apart from that, Baidu’ VIE structure may also limit the size of its CDR issuance, according to the abovementioned local media.
Alibaba and JD
The first batch of foreign-listed companies to list in Mainland China via CDRs include Baidu, Alibaba, Tencent, JD.com, Ctrip, Sina Weibo, NetEase and Sunny Optical Technology, Caixin reported earlier in May.
Amid the rush to cash in at a higher valuation after a domestic secondary listing, JD and Alibaba are said to be lagging behind Baidu in their preparation for CDR issuance.
The hurdle for JD to overcome is that it failed to turn a profit in the years operating, thus putting more risk on the domestic stock market from a regulatory point of view, a securities trader familiar with the matter told Caixin. For another e-commerce giant, Alibaba, although the company adopts a similar dual-class share structure as Baidu, its much-more-complicated stockholder structure adds another layer of complexity to its CDR issuance.
Xiaomi has filed in May with HKEX for what could be the biggest IPO this year, and on June 8, the smartphone manufacturer became the first Chinese company and unicorn to file an application to issue CDR, adding an A-share listing to its planned HK floatation.
The company has picked a Chinese stock exchange as its main listing venue and is likely to issue CDRs which are worth over USD 5 billion, half of its IPO target, according to Caixin.
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Editor: Jason Zheng