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KrASIA confirmed with Grab, Gojek, and Tokopedia that they are offering ESOPs for their employees. Yet these firms didn't offer details about the vesting period, the share distribution among workers, or eligibility.
A senior-level employee at an Indonesian e-commerce unicorn said that he has joined his company's ESOP, with a two-year vesting period. "It's good to have it, but I don't expect much from it. Even if I cash it out now, it won't even amount to as much as my main salary, so it's not really impactful," he said, asking KrASIA not to reveal his name or the company he works for.
Others see ESOPs as a tempting benefit. "I am aware of ESOPs in tech companies but wasn't offered one when I got my job. But I would like to be part of one. I think it could serve as a kind of savings or investment aside from my salary and benefits," a customer service representative for a hotel startup told KrASIA. He would consider moving to another company offering similar or slightly lower salaries and benefits but with an equity share in tow.
The lack of awareness about ESOPs among employees is one of the problems, Ravulaparthi said. "Many founders have told us that it is good to have an ESOP, but they have to explain the value of such ESOPs to their employees."
"Salary is very well understood. ESOP is also a form of compensation, but it needs to be understood by the employees to feel special about receiving that compensation," Ravulaparthi added.
Founders also need to understand better what ESOPs are and how to offer these plans to employees successfully, said Casper Peh, CEO and founder of Antler-backed ESOP management platform Svested.
"Currently, all the information on ESOP is US-centric, and there isn't much information online for this region. As such, founders are often left clueless on how to go about doing it, and there is a huge information gap," he said. "It is a situation where founders are in the dark and, as such, not able to utilize this powerful tool for quality hires."
<figure id="attachment_38271" aria-describedby="caption-attachment-38271" style="width: 696px" class="wp-caption aligncenter"><img class="wp-image-38271 size-full" src="https://console.kr-asia.com/wp-content/uploads/2019/08/Tokopedia-Office-05-696x464.jpg" alt="" width="696" height="464" srcset="https://console.kr-asia.com/wp-content/uploads/2019/08/Tokopedia-Office-05-696x464.jpg 696w, https://console.kr-asia.com/wp-content/uploads/2019/08/Tokopedia-Office-05-696x464-300x200.jpg 300w" sizes="(max-width: 696px) 100vw, 696px" /><figcaption id="caption-attachment-38271" class="wp-caption-text">Tokopedia is one of the companies that offer ESOP plans in Indonesia. Image courtesy of Tokopedia.</figcaption></figure>
<h3>What's next?</h3>
Indonesia currently has more than 2,000 startups operating in the country, according to data from the country's Communication and Information Ministry released in 2020. The number will only continue to grow as the country's digital economy value is projected to reach USD 125 billion by 2025.
"The Indonesian startup ecosystem is one of the fastest-growing ones out there. As the startup ecosystem is growing fast, ESOP options will be there," said Ravulaparthi.
Venture capital firms also played a part in boosting ESOP adoption among tech companies. Both Khoo and Ravulaparthi agreed that ideally, a company should set aside 10% from its cap table for ESOPs. "In our investment round, we already make it mandatory for founders to set aside said amount for ESOPs," said Khoo.
Equity management platforms such as Qapita and Singapore-based Svested can also help founders and employees to understand ESOPs better. "They help employers manage and execute ESOPs, and help better communicate their value to employees. Knowledge about the benefits of ESOPs will become more common, and execution by founders can be more robust and flexible," Khoo added.
However, Ravulaparthi said that founders should also think about liquidity options. Employees in publicly listed companies can cash out their shares at any time in the stock market, but the situation is not the same for shareholders of private companies. Not many companies frequently conduct buybacks or liquidity events, which can result in employees' shares essentially becoming "stuck." "In addition to creation, you also have to give employees a chance to sell when the time is appropriate, so that they can make money from those ESOPs," he said.
Peh and Ravulaparthi said that in Southeast Asia, the standard vesting period is three to four years, although some companies offer shorter periods of two years. Going forward, Peh said that companies should start incorporating liquidity events for ESOP holders more often in fundraising rounds.
"For example, out of USD 50 million raised, around 1 million to 2.5 million can be used to help early employees cash out. Or even have an avenue for private or angel investors to join in the round and do some degree of liquidity for early employees," he said.
As many Indonesian tech companies are eyeing initial public offerings, this could help boost the popularity of ESOPs, Peh said. "IPOs can have a positive impact as many employees will be able to cash out and make significant financial gains. This will set a good precedent and increase the value of ESOPs," Peh added.
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Can ESOPs help Indonesian startups lure and retain top talent?

Private Equity

Indonesia

… equipment and performing medical tasks, delivering various commercial goods more quickly, and enabling urban air mobility to function at scale in the future.
The first test included 20 drones from five different ventures flying simultaneously over one single urban airspace. The companies were High-Lander Aviation and Cando, HarTek Technologies, F.T Technologies and SkyLinx, Simplex Interactive, and Airwayz Drones.
The 20 drones were monitored in the control room using software developed by Airwayz Drones which offers a multi-platform software that can control, manage, and automate the operation of drone fleets of different types for various missions. The solution uses a cloud-based network and decentralized swarm technology to share all flight information and enable operational coordination in real-time.
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Skylinx, together with Airwayz and FlyTech, established the “SAFE” group, a partnership tasked with developing Beyond Visual Line of Sight (BVLOS) applications that can operate urban delivery routes commercially, and will start piloting in Tel Aviv together with various companies and vendors that have already agreed on future cooperation.
Hundreds of others have already been scheduled to fly in various demonstrations over a two-week period, according to a joint statement from the organizations. This is the first such demonstration in Israel out of a series of eight planned to take place over the next two years.
“This is a significant global breakthrough in the ability to manage drone operations at scale, which will lay the foundation for future national drone operations in many areas,” the parties said in the statement. “To support the current phase of the pilot, the participating companies have been granted funds by the Israel Innovation Authority, as part of the Innovation Authority Piloting Fund Program.”
“A smart traffic management and air traffic control center that manages and prioritizes a number of drones flying simultaneously in one geographic airspace is a remarkable achievement, setting the stage for the future of mobility applications, a field in which Ayalon Highways is primed to play a leading role,” said Itamar Ben Meir, CEO of Ayalon Highways. “This demonstration is part of a long list of technological and regulatory developments required for the commercial operation of a national low-altitude air traffic network for drones in urban settings.”
The NAAMA Initiative tapped many local, international, public, and private stakeholders to facilitate technological breakthroughs while removing regulatory barriers and enabling Israel to become a "beta site" for drone piloting and operations, the Innovation Authority said.
This article first appeared in <a href="https://nocamels.com/2021/04/pilot-israel-drone-delivery-flytech/" target="_blank" rel="nofollow noopener noreferrer" data-type="external">NoCamels</a>, which covers innovations from Israel for a global audience.

FlyTech wins two-year pilot contract for drone deliveries in Israel

Drones

Facebook faces fresh scrutiny in Southeast Asia, after data from over 15 million users in the region was exposed in a recent leak that could put individuals at risk of identity theft and impersonation attempts, according to local privacy watchdogs.
The data trove, that was uncovered last Saturday by Alon Gal, the co-founder of Israeli cybercrime intelligence firm Hudson Rock, contains information of over 530 million users including profile names, Facebook IDs, locations, occupations, birthdates, phone numbers, and email addresses.
“All 533,000,000 Facebook records were just leaked for free," said Gal on Twitter. "This means that if you have a Facebook account, it is extremely likely the phone number used for the account was leaked. I have yet to see Facebook acknowledging this absolute negligence of your data.”
<blockquote class="twitter-tweet tw-align-center">
<blockquote class="twitter-tweet" data-width="500" data-dnt="true">
In early 2020 a vulnerability that enabled seeing the phone number linked to every Facebook account was exploited, creating a database containing the information 533m users across all countries.
It was severely under-reported and today the database became much more worrisome 1/2 <a href="https://t.co/ryQ5HuF1Cm">pic.twitter.com/ryQ5HuF1Cm</a>
&mdash; Alon Gal (Under the Breach) (@UnderTheBreach) <a href="https://twitter.com/UnderTheBreach/status/1349671294808285184?ref_src=twsrc%5Etfw">January 14, 2021</a></blockquote>
<script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script></blockquote>
Facebook responded <a href="https://about.fb.com/news/2021/04/facts-on-news-reports-about-facebook-data/" target="_blank" rel="noopener noreferrer">in a blogpost</a> three days later, saying that “malicious actors” obtained the data from its platform before September 2019. “As a result of the action we took, we are confident that the specific issue that allowed them to scrape this data in 2019 no longer exists,” read the post.
Malaysia is the most affected country with over 11 million being exposed, followed by Singapore with 3 million, 879,699 users in the Philippines, 213,995 in Brunei, 130,331 in Indonesia, as well as 2,838 people in Cambodia, <a href="https://www.bleepingcomputer.com/news/security/533-million-facebook-users-phone-numbers-leaked-on-hacker-forum/" target="_blank" rel="noopener noreferrer">according to</a> BleepingComputer.
Facebook counts 377 million users in Southeast Asia, 13% of its global audience of 2.8 billion, according to <a href="https://www.statista.com/statistics/193056/facebook-user-numbers-in-asian-countries/" target="_blank" rel="noopener noreferrer">data</a> from Statista. Jean F. Queralt, the founder and CEO of the IO foundation, a digital rights advocate, told KrASIA that people in the region and beyond in general don't have a strong understanding of the nature of data, which makes them particularly vulnerable when it comes to leaks or breaches. “At social media like Facebook, users basically relinquish their rights to the data,” he said.
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While Facebook said that the vulnerability was patched by the company in August 2019, it also emphasized in comments to KrASIA that the leaked data was not gained by hacking but by scraping and that the firm is in talks with regulators.
Governments across the region have been alerted by the incident. Singapore's Computer Emergency Response Team (SingCert) <a href="https://www.csa.gov.sg/singcert/advisories/ad-2021-004" target="_blank" rel="noopener noreferrer">on Monday</a> warned of possible dangers.
“Threat actors may use the leaked information to conduct phishing and other social engineering attacks. Facebook users should remain vigilant and look out for unsolicited phone calls and messages sent over SMS and instant messaging applications such as WhatsApp,” said SingCert.
The agency added that threat actors may utilize caller ID spoofing technology to impersonate the user and conduct further attacks with malicious links, or try to compromise other accounts of the victim with the obtained personal data.
<h3>Regional governments in alert mode</h3>
In the Philippines, the National Privacy Commission <a href="https://www.privacy.gov.ph/2021/04/npc-investigating-alleged-large-scale-facebook-breach/" target="_blank" rel="noopener noreferrer">said</a> that it is still validating the information that 879,699 people have been affected and that it immediately reached out to Facebook’s data privacy officer for more details on the situation.
“As we await more answers, we highly encourage Facebook users to be more cautious online. We reiterate the need for the regular changing of passwords and the activation of two-step authentication of accounts to safeguard personal information,” the watchdog said.
Queralt added that there is an array of ways to prevent impersonations by bad actors, such as password managers, having a different password for each account, and avoiding to answer security questions with facts that can be easily verified.
Although some countries in the region, including Singapore and Malaysia, have a personal data protection law in place, the governments have to make sure that there is a standard mechanism in terms of implementation, he said. “We don't go around wondering if a seat belt is safe or not, do we?"

How has Southeast Asia been affected by the recent Facebook data leak?

Facebook

Social impact

Cambodia

Malaysia

Philippines

Singapore

San Francisco and Mumbai-headquartered Gupshup, which enables companies to build messaging services and bots to interact with customers, has raised USD 100 million from Tiger Global at a valuation of USD 1.4 billion. With this, the New York-based hedge fund has catapulted four companies this week to the unicorn club, companies with a valuation of at least USD 1 billion.
The 16-year-old company, which claims to be profitable for years now, said it will raise additional funds from more investors before doing the second close of the ongoing Series F financing round.
Beerud Seth, co-founder and CEO of Gupshup, started the company in 2005 to let customers send group messages over SMS. Six years later, it realized that model was not going to make money and pivoted to providing smart messaging services to enterprises that had money to pay. It was about the same time when the company raised its Series E round.
After the pivot, Gupshup grew rapidly and by the end of 2020 was clocking an annual revenue run rate of approximately USD 150 million.
<img class="aligncenter size-full wp-image-76797" src="https://console.kr-asia.com/wp-content/uploads/2020/05/India_Newsletter.png" alt="Startup" width="1740" height="348" srcset="https://console.kr-asia.com/wp-content/uploads/2020/05/India_Newsletter.png 1740w, https://console.kr-asia.com/wp-content/uploads/2020/05/India_Newsletter-300x60.png 300w, https://console.kr-asia.com/wp-content/uploads/2020/05/India_Newsletter-1024x205.png 1024w, https://console.kr-asia.com/wp-content/uploads/2020/05/India_Newsletter-768x154.png 768w, https://console.kr-asia.com/wp-content/uploads/2020/05/India_Newsletter-1536x307.png 1536w" sizes="(max-width: 1740px) 100vw, 1740px" />
<blockquote>
<h3>Also read: <a href="https://kr-asia.com/indian-deep-tech-startups-are-finally-taking-off" target="_blank" rel="noopener noreferrer">Indian deep tech startups are finally taking off</a></h3>
</blockquote>
Currently, Gupshup has enabled over 100,000 developers and businesses to build messaging and conversational experiences for customer engagement. It claims to deliver six billion messages per month across 30 plus messaging channels. Gupshup plans to use this investment to rapidly scale product and go-to-market initiatives worldwide.
“The growth in business use of messaging and conversational experiences, transforming virtually every customer touchpoint, is an exciting secular trend,” said John Curtius, partner at Tiger Global Management.
He added, “Gupshup is uniquely positioned to win in this market with a differentiated product, a clear and sustainable moat, and an experienced team with a proven track record. In addition to its market leadership, Gupshup’s unique combination of scale, growth, and profitability attracted us.”
The company said its product, which is tailored for a mobile-first economy like India, is seeing great traction in emerging markets with similar dynamics.
“Customers expect to converse with businesses the way they do with friends. They expect the conversation to be simple, easy, quick, contextual, and personalized” explained Sheth.
He said Gupshup aims to build tools that can help businesses engage with customers in a better way through mobile messaging. "As we work towards our mission, we are delighted with this investment from Tiger Global, given its incredible track record of making big, bold, successful bets on innovative, category-defining companies worldwide."
Besides Gupshup, the list of companies in which Tiger Global invested this week at a billion dollar plus valuation, includes Cred, wealth tech platform Groww, and social networking firm ShareChat.

Tiger Global catapults Indian enterprise messaging platform Gupshup to the unicorn club with USD 100 million check

Tiger Global

Enterprise Services

India

Chinese online education unicorn VIPKid has <a href="https://www.yicai.com/news/101013434.html" target="_blank" rel="noopener noreferrer">halted financial and human resources support</a> for its Dami Wangxiao (Dami Online School) platform, Chinese media outlet Yicai reported on Wednesday.
Zhang Yuejia, who led Dami Wangxiao, has returned to VIPKid to lead a sales team, while instructors and operational staff have either been absorbed into the parent company or resigned.
Only <a href="https://www.damiwangxiao.com/courseDetail?grade=12&amp;bundle=false&amp;spuId=100743&amp;subject=7" target="_blank" rel="noopener noreferrer">online math classes running until June</a> are still available on Dami. Other companies in the online education sector are already recruiting students for summer courses and the next academic year. For example, Yuanfudao, a major player in the sector, is placing students in courses that run until January 2, 2022.
"Since 2021, VIPKid has optimized and updated its business, including Dami Wangxiao, to focus on its core English teaching. The update is aimed at improving the learning experience and will not impact Dami Wangxiao users," VIPKid confirmed with tech blog AI Caijingshe on Thursday.
VIPKid merged its large-group class platform Fengxiao and small-group class product SayABC in January 2020, renaming the combined business Dami Wangxiao. The new entity <a href="https://36kr.com/p/1724948348929" target="_blank" rel="noopener noreferrer">raised USD 80 million from investors</a>, including Tencent and Sequoia Capital China, in its Series A round.
However, that sum of money pales in comparison to what its competitors spent last year to acquire new students.
Larry Chen, founder and chairman of GSX Techedu, told analysts during the company's Q2 2020 earnings call that the top ten players in the market have <a href="https://seekingalpha.com/article/4372339-gsx-techedu-inc-gsx-ceo-larry-chen-on-q2-2020-results-earnings-call-transcript">spent more than RMB 10 billion</a> (USD 1.5 billion) altogether on traffic acquisition and branding last July and August, citing unnamed third-party data.
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VIPKid downsizes group class platform Dami Wangxiao

Edtech

China

… class="wp-caption aligncenter"><img class="size-large wp-image-117555" src="https://console.kr-asia.com/wp-content/uploads/2021/03/shutterstock_1486624034-1024x683.jpg" alt="" width="1024" height="683" srcset="https://console.kr-asia.com/wp-content/uploads/2021/03/shutterstock_1486624034-1024x683.jpg 1024w, https://console.kr-asia.com/wp-content/uploads/2021/03/shutterstock_1486624034-300x200.jpg 300w, https://console.kr-asia.com/wp-content/uploads/2021/03/shutterstock_1486624034-768x512.jpg 768w, https://console.kr-asia.com/wp-content/uploads/2021/03/shutterstock_1486624034-1536x1024.jpg 1536w, https://console.kr-asia.com/wp-content/uploads/2021/03/shutterstock_1486624034-2048x1365.jpg 2048w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption id="caption-attachment-117555" class="wp-caption-text">AirAsia boss Tony Fernandes is confident that his company's pivot will turn the company into a serious player in the tech scene. Courtesy of AirAsia.</figcaption></figure>
<h3>Making it through the pandemic</h3>
Over the past year, there has been plenty of new experimentation to open up previously unexplored channels of revenue. Those that stick will be lifelines, as the aviation industry is expected to return to normal only in late 2023 or early 2024, according to Mui-Fong Goh, senior partner and head of Asia transportation practice at management consulting firm Kearney.
Even so, new services offered by airline companies can’t really make up for the financial hit caused by the pandemic in a short time, Goh said. “It will be difficult for any of the new businesses to make up the loss of passenger revenues. These new offerings are attempts to tide over this difficult time for airline companies, but they would be hard-pressed to find sufficient adjacent revenue streams to be sustainable. Government support is still very necessary.”
Nonetheless, Goh believes that airlines have various advantages that give them an edge as they diversify their business, such as the novelty factor, superior levels of customer service, technology, and existing partnerships with other businesses. Companies can leverage these qualities for new ventures and acquire new customers, especially when travel remains difficult.
China’s HNA Group is one example of how an airline company transformed into a major conglomerate. It started off as Hainan Airlines, and the group now owns more than 2,000 companies that span real estate, logistics, tourism, and more. However, the conglomerate now faces bankruptcy because the group is unable to pay off its debts. HNA Group’s overstretched business also led to <a href="https://asia.nikkei.com/Business/Markets/China-debt-crunch/Chinese-court-says-troubled-HNA-Group-s-businesses-highly-chaotic" target="_blank" rel="noopener noreferrer">highly disorganized corporate management</a> and more than 300 of its affiliates did not function as independent companies, according to media reports.
Goh declined to comment on HNA Group’s case. She said that although airlines excel at providing great customer experience and running tight operations, they need to rethink risk management from a different starting point when they try new ventures. “New businesses, new ecosystems, new partnerships, and new technology will all be required to safeguard and strengthen airline companies going forward,” she said.
The pandemic has dropped many companies into unique scenarios that few had anticipated, and for now, their only choice is to hang on and survive. For AirAsia, tapping into e-commerce, food delivery, and fintech may be a sensible choice. However, the company still has a lot to prove before its digital platform can be called the next super app.
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AirAsia's new services take flight in bid to form Southeast Asia's next super app

Fintech

Garena's mobile shooting game Free Fire has overtaken Tencent's PUBG Mobile as the top battle royale game by player spending in the first quarter in the US, generating about USD 100 million in revenue against USD 68 million for PUBG, according to <a href="https://sensortower.com/blog/state-of-mobile-battle-royale-q1-2021" target="_blank" rel="noopener noreferrer">analytics firm Sensor Tower</a>.
Free Fire's US revenue was 4.5 times higher compared to the first quarter last year, while PUBG Mobile logged just a 9% uptick. Call of Duty: Mobile, developed by Tencent's Timi Studios and Activision, trails behind with USD 62 million in revenue.
PUBG Mobile, however, still leads the battle royale space globally. Combined with its Chinese adaption Game For Peace, it garnered USD 744.4 million in Q1. Free Fire reached USD 255 million, followed by Call of Duty: Mobile with USD 182 million.
The removal of Epic Games' Fortnite from Apple's App Store and Google Play in August 2020 helped these contenders along. The publisher was <a href="https://www.msn.com/en-us/entertainment/gaming/why-was-fortnite-removed-from-the-app-store-and-google-play/ar-BB17XKXT" target="_blank" rel="noopener noreferrer" data-cke-saved-href="https://www.msn.com/en-us/entertainment/gaming/why-was-fortnite-removed-from-the-app-store-and-google-play/ar-BB17XKXT">banned</a> after introducing its own in-app payment system, Fortnite Mega Drop, which violated the stores' guidelines. The battle royale market accumulated USD 1.3 billion in Q1, making up 86.7% of the global mobile shooter market revenue.
Launched in 2017, Free Fire is published by game developer Garena, a unit of Singapore-based tech giant Sea Group. The game quickly grew its user base in Southeast Asian countries, Brazil, and India. Despite having lower graphics quality and a less realistic feel compared to PUBG, Free Fire is said to be <a href="https://www.oneesports.gg/gaming/how-did-free-fire-become-the-worlds-most-popular-battlegrounds-game/" target="_blank" rel="noopener noreferrer">more compatible with smartphones</a>.
For years, Garena has been Sea Group's money-making engine. Gaming revenues grew by 111.1% YoY during Q4 2020, reaching USD 1 billion, according to its <a href="https://kr-asia.com/sea-group-posts-robust-growth-in-2020-as-gaming-and-e-commerce-swell-during-the-pandemic" target="_blank" rel="noopener noreferrer" data-cke-saved-href="https://kr-asia.com/sea-group-posts-robust-growth-in-2020-as-gaming-and-e-commerce-swell-during-the-pandemic">latest earnings report</a>. Garena's quarterly active users increased by 72.1% YoY to 610.6 million, with 12% as paying customers, compared to 9.4% in the same period of 2019. For the full year of 2021, Sea Group expects bookings for Garena to be around USD 4.4 billion, representing 38% YoY growth.
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Garena Free Fire tops Tencent's PUBG Mobile for the first time in the US

Sea Group

Tencent

Gaming

The stock of Chinese logistics giant SF Holding (<a href="https://finance.yahoo.com/quote/002352.SZ?p=002352.SZ&amp;.tsrc=fin-srch" target="_blank" rel="noopener noreferrer">SHZ: 002352</a>) fell 10% to RMB 72.72 (USD 11.10) in the A-share market on Friday. Its trading was halted following a <a href="http://www.szse.cn/disclosure/listed/bulletinDetail/index.html?0ec0f2bd-dfc4-417d-8a7a-6f361ccb7740" target="_blank" rel="noopener noreferrer">profit warning</a> for the first quarter on Thursday night. The company now expects a net loss of RMB 900 million to 1.1 billion (USD 137–168 million), after generating RMB 907.3 million in net profits in the first quarter of 2020, at the height of the COVID-19 pandemic in China.
SF Holding cited expenditures for new businesses among the main reasons for the losses, without identifying specific new initiatives in its filing with the Shenzhen Stock Exchange. KrASIA reported in January that the firm <a href="https://kr-asia.com/sf-express-makes-hurried-entrance-into-neighborhood-group-buying" target="_blank" rel="noopener noreferrer">launched a community group-buying mini program</a> on WeChat, called Fenghuotai, adding its name to the list of well-known companies entering the booming sector.
The company is seeking to acquire a majority stake in Kerry Logistics, via its wholly owned subsidiary Flourish Harmony, in an <a href="https://kr-asia.com/sf-holding-to-take-control-of-logistics-firm-kerry-in-usd-2-3-billion-deal" target="_blank" rel="noopener noreferrer">HKD 17.5 billion (USD 2.3 billion) deal</a> that will allow it to expand internationally. This deal is yet to close. Investments in service capacity to meet increasing demand also contributed to the losses, the company said in the filing.
SF Express encouraged its couriers and other employees to stay on duty during the Chinese Spring Festival in February by paying them more than in any other year. However, its competitors followed suit and managed to acquire several lucrative orders, aggravating the pain for the logistics firm.
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Shares of logistics giant SF drop 10% after unexpected Q1 loss

Logistics

The best start to a year ever for Chinese listings on American stock exchanges is showing signs of strain.
Chinese companies raised USD 4.4 billion on the New York Stock Exchange and the Nasdaq Stock Market through April 7 compared with just USD 807 million over the same period last year, according to data compiled by Dealogic.
Yet the 10 Chinese companies that have debuted in New York since Feb. 9 have fallen on their first day of trading. Question-and-answer website Zhihu dropped 11% in its debut March 27 after pricing the USD 523 million offering at the bottom of its marketed range.
By comparison, 17 Chinese companies that each raised at least USD 100 million in US IPOs last year gained 28% on their debut, according to Dealogic.
"A combination of geopolitics, concerns over valuation and fears there could be more episodes such as Archegos Capital is denting the strong start to the year for equities in general and for Chinese listings in the US," said Terence Ng, co-founder of investment advisory company IJK Capital Partners in Singapore, referring to a US family office which last month triggered billions in losses for banks including Nomura and Credit Suisse in fire sales of its holdings, including shares of Chinese internet companies Baidu and Tencent Holdings.
"The appetite for Chinese companies will continue as they promise continued growth. However, deal flow in the short term depends on the market sentiment," Ng said.
Waning investor demand could dampen the outlook for more than 10 companies including Ant Group-backed bike-sharing service Hello and SoftBank-backed freight company Full Truck Alliance, which are seeking collectively to raise over USD 8 billion, according to people familiar with the deals.
Power bank rental company Smart Share Global, which is known as Energy Monster and is backed by Alibaba Group Holding, smartphone maker Xiaomi, and private equity fund Hillhouse Capital, was forced last week to halve the size of its offering to USD 150 million after pricing it at USD 8.50 a share, well below the marketed range. It slid 5.3% on its first day of trading.
<figure id="attachment_118557" aria-describedby="caption-attachment-118557" style="width: 1178px" class="wp-caption aligncenter"><img class="wp-image-118557 size-full" src="https://console.kr-asia.com/wp-content/uploads/2021/04/Nikkei-1.png" alt="" width="1178" height="668" srcset="https://console.kr-asia.com/wp-content/uploads/2021/04/Nikkei-1.png 1178w, https://console.kr-asia.com/wp-content/uploads/2021/04/Nikkei-1-300x170.png 300w, https://console.kr-asia.com/wp-content/uploads/2021/04/Nikkei-1-1024x581.png 1024w, https://console.kr-asia.com/wp-content/uploads/2021/04/Nikkei-1-768x436.png 768w" sizes="(max-width: 1178px) 100vw, 1178px" /><figcaption id="caption-attachment-118557" class="wp-caption-text">Graph by Nikkei Asia.</figcaption></figure>
"Investors are turning cautious toward equities more broadly and Chinese tech names have borne the brunt of the sell-off," said a person who worked on some of the recent listings. "While there remains a lot of interest toward Chinese names given the growth prospects, investors are asking more questions. They appear to want companies to price offerings very conservatively."
Zhihu, which counts Alibaba and Tencent among its investors, priced its offering on March 26 at USD 9.50 a share. While the shares have recovered from their first-day slump, they are still below their IPO price, closing Thursday on the NYSE at USD 8.96.
Last year, 36 Chinese companies raised USD 13.5 billion on American exchanges, the highest total since 2014's record haul of USD 29.1 billion, according to Dealogic. The 2014 bonanza stemmed from Alibaba's USD 25 billion NYSE IPO.
Chinese companies continue to flock to the U.S. to tap its deep investor pool and in the belief that Washington and Beijing will arrive at a compromise to avert the expulsion of hundreds of Chinese companies.
Under a law passed last year by the US Congress, Chinese companies risk can be kicked off American exchanges by 2023 if American regulators are not permitted to review their audit records. Beijing forbids such reviews on national security grounds. The US Securities and Exchange Commission last month launched initial steps toward putting the law into force.
As of October, there were 217 Chinese companies listed on US exchanges with a total market capitalization of USD 2.2 trillion, according to the US-China Economic and Security Review Commission.
"Many advantages the U.S. market possesses over the Chinese market are long term and structural," said Tianlei Huang, research fellow at the Washington-based Peterson Institute for International Economics. "And in the calculation of those firms seeking US listings, such structural advantages may well outweigh the challenges posed by stricter auditing rules and other uncertainties in the broader US-China relations."
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Record pace of Chinese listings in US shows signs of strain