Xiaohongshu, a pioneering social commerce platform that has gained popularity in China by hosting a variety of user-generated content related to cosmetics and beauty products, has called off plans to float shares in the United States, according to Bloomberg.
The company, also known as Red, hired a former Citigroup executive, Yang Ruo, as its CFO in March in preparation for an initial public offering in New York. At the time, investors said an IPO could give Red a valuation of USD 10 billion, up from a USD 6 billion mark in early 2020.
In June, Red ran afoul of Chinese censors and its Weibo microblog account was suspended.
A series of Chinese companies that were expected to go public on the Nasdaq or New York Stock Exchange have halted their IPO process. These include TikTok maker and app factory ByteDance, which is valued at USD 425 billion on the gray market; fitness app operator Keep, which is backed by SoftBank and Tencent; Ximalaya, a leading podcast platform; LinkDoc, a medical data firm that is backed by Alibaba Health; and Soulgate, the parent company of Soul, a social network popular with China’s Gen Z.
Tech companies in China currently face a three-pronged crackdown—antitrust, fintech, and data sovereignty. The Cyberspace Administration of China, once a government organ with moderate influence, now wields outsized authority over tech firms in the realm of data security and is using its power in full force to bring corporations to heel.
A policy draft released on July 10 indicates that any company with more than 1 million users looking to float shares abroad must undergo a security review.