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KEY STAT | Chinese unicorns’ valuations slip amid the coronavirus outbreak

Written by Julianna Wu Published on   2 mins read

Chinese unicorn valuations fell after a recent series of corporate misconduct and fraud allegations against US-listed Chinese companies.

A couple of Chinese unicorns saw their valuation in the secondary market fall below the levels of the previous fundraising rounds, highlighting investors’ uncertainty over the market amid the global coronavirus outbreak, Reuters reported on Thursday.

SoftBank-backed face recognition developer SenseTime and DJI, the world’s largest commercial drone maker, both experienced a 10% drop in the valuation, compared to their latest fundraising rounds in June 2019 and April 2018, respectively.

While online education platform VIPKID lost 15% of its valuation, which slumped to USD 3.95 billion, bike-sharing firm Hellobike saw a 20% decrease to USD 3.2 billion, according to the same Reuters report.

The drop in valuation followed a recent series of corporate malfeasance scandals that rocked a number of US-listed Chinese companies.

On April 7, coffee seller Luckin (NASDAQ: LK) admitted that the company’s COO had faked RMB 2.2 billion (USD 310.5 million) in revenue, leading to a 75.6% share decrease that day and potential lawsuits in the future, KrAsia reported.

On the back of Luckin’s fiasco, video streaming platform iQiyi (NASDAQ:IQ) was accused of fabricating revenue and user numbers by Muddy Waters, the same short-seller who condemned Luckin Coffee to financial ruin with a 90-page investigation report.

On the same day, education giant TAL Education (NYSE: TAL) disclosed its own sales fraud, while its rival GSX Techedu (NYSE: GSX) was also hit with allegations of fabricating metrics a week later.

Lured by the world’s largest capital markets, many Chinese internet companies have chosen to list on US stock exchanges in recent years to optimize their fundraising. However, due to the recent fraud allegations, Chinese companies are likely to face tougher audits and a more cautious investing environment in the near futureSina Finance reported.

In addition to lower investor confidence, Chinese companies also face obstacles to their fundraising and IPO plans, which are likely to be delayed as the global COVID-19 pandemic persists into 2020.


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