Home appliance maker Midea Group has been questioned by China’s securities regulator on how a planned $2 billion-plus Hong Kong listing could impact the value of its Shenzhen-listed shares, said three people with direct knowledge of the matter.
Midea, based in Foshan city in Guangdong province, applied in October to list no more than 10% of its enlarged capital on the Hong Kong Stock Exchange.
There has been no movement on the deal since, the people said, while the application is reviewed by the China Securities Regulatory Commission (CSRC) whose approval is required for offshore listings.
In April, the regulator strengthened supervision of onshore listings to protect small investors amid a stock market rout. It also toughened rules for firms seeking funds offshore through initial public offerings (IPOs), listings or primary placements.
Midea’s deal was estimated to be worth $3 billion to $5 billion when first flagged in August.
The final size could be worth over $2 billion, one of the people said. Downsizing deal would be the result of market volatility and investor willingness amid Sino-U.S. geopolitical tension, the people said.
The people declined to be identified discussing confidential information. Midea and the CSRC did not respond to Reuters’ requests for comment.
Midea was questioned on how much a Hong Kong listing could effect the value of its Shenzhen-listed shares given Hong Kong stocks often trade at a discount to those on mainland markets, the three people said.
The manufacturer’s Shenzhen-listed shares have risen more than 20% this year, reaching a market capitalisation of about $64.5 billion.
The regulator has been examining valuation differences between the mainland and Hong Kong for all Chinese companies wanting to carry out another listing in an offshore venue, a fourth person said.
Dealmakers hope a successful large deal by a well-known company like Midea could revive Hong Kong’s listing prospects.
The value of IPOs and listings in Hong Kong so far in 2024 has reached $1.21 billion compared to $1.85 billion in the same period last year, showed Dealogic data. That is far below the $27.3 billion year-to-date record set in 2021.
Reuters