China’s IPO Applications Plunge in First Half of 2023

So far, 2023 has not been a good year for the Chinese IPO (initial public offering) market.

As Reuters reported Monday (July 10), IPO applications in that country dropped by a third in the first half of the year, with candidates scared off by a rocky earnings climate, a weakening economy and greater scrutiny from regulators. It’s a situation that is playing out as the demand for IPOs remains shaky in other markets around the world.

According to the report, exchange data shows that Chinese exchanges accepted 330 new applications in the first six months of 2023, down from more than 500 in the same period last year.

As a result, the amount of proceeds raised from China’s IPO market has decreased from last year, although it was still the largest globally in the first half.

“Regulators have imposed stringent rules and penalties on the sponsors, making them more cautious in sponsoring companies’ IPOs,” Terence Ho, Greater China IPO leader at EY, told Reuters.

The notable decrease in applicants was cited by one unnamed banker, who said, “The number of applicants dropped a lot because the implicit bar is getting much higher.”

More than 100 companies ended their applications in the first half, most of them voluntarily. The government has responded by proposing reforms and introducing the ability for firms to issue dual-class shares.

As PYMNTS has reported, the market for IPOs has been somewhat uncertain of late, due to rising interest rates and inflation hindering demand for new listings.

A recent Wall Street Journal (WSJ) report found that traditional IPOs raised around $9 billion in the first half of 2023. That number is higher than last year’s, but still under the respective $87 billion and $24 billion companies had generated at the midway points of 2021 and 2020.

“We’re in an IPO market that’s not fully open yet. We’re in rebuilding mode,” Douglas Adams, Citigroup’s global co-head of equity capital markets, told the WSJ. “Rebuilding modes generally aren’t a straight line.”

Among the companies in retreat mode is teen-centric jewelry and accessory retailer Claire’s, which recently scrapped its plan to go public when it withdrew its application for an IPO that had been before the U.S. Securities and Exchange Commission (SEC) since 2021.

On the other side of the spectrum, Shein, the online fashion retailer with roots in China, is reportedly looking to go public, and has been working with investment banks and talking to both the Nasdaq and New York Stock Exchange.

As PYMNTS has written, an IPO could make Shein the most valuable IPO for a Chinese company in the U.S. since Didi Global, the ride-hailing firm that was valued at $68 billion when it went public in 2021.