In Brief:

  • China fintech giant Lufax is planning a US IPO.
  • Despite US-China tensions, and some Chinese IPOs planned for the US being canceled, companies — including Lufax — chose to list in the US citing investor demand
  • China is incentivizing more companies to list domestically

Chinese online lender Lufax is reportedly applying for an IPO in the US—in response to a move by market regulators in China tightening listing rules to restrict IPOs. Authorities there are also pressuring firms to list domestically and in Hong Kong. 

Lufax is the second-largest P2P lender in China, and is 43% owned by Ping An Insurance. To date, it has raised $3 billion, with its most recent funding round led by local fund Primavera Capital, and backed by JP Morgan and UBS. That gives the company a $38 billion valuation

According to the company’s disclosures, it has 44 million registered users on its platform, up 9% on-year with assets under management coming in at $50 billion. 

According to sources quoted by the Nikkei Asian Review, the firm filed confidential paperwork with the SEC on August 12, the first step in the listing process. The group hopes to have the offering on the market within two months; Bank of America, Goldman Sachs, HSBC and UBS are underwriting the IPO, Nikkei reported 

US IPOs are still a ‘gold standard’

Treasury Secretary Steven Mnuchin has warned Chinese firms that want to be listed in the US that they must conform to US auditing standards by the end of 2021. That move came after some of the biggest Chinese IPOs to list in the US disclosed rampant internal fraud, or were targeted by short-sellers for inflating their numbers. The new Treasury regs require firms to turn over their audit records, though that would conflict with corporate secrecy laws in China.

Despite rising political and regulatory tensions between the US and China, and China’s efforts to incentivize Chinese firms to list in-country, or—cancel US listings outright and move back to China—investors still hold the US IPO in the highest regard.

Chinese companies raised $1.8 billion through US IPOs for the year through mid-June. According to a report from The Wall Street Journal that cited Bank of New York Mellon data, Chinese companies’ American depositary receipts gained 18.2% in the year to date, outperforming the S&P 500 index’s 4.6% gains.

China wants to keep capital at home

Beijing is well-aware that firms have a preference for listing in the US, and the dependency on US capital is a strategic weakness for the country’s push for economic autonomy. 

Regulators in China have proposed plans for its biggest firms to begin the process of coming home by starting with a cross-listing on Shanghai Stock Exchange’s new Science and Technology Innovation Board, dubbed the Star market. 

Beijing has also worked to boost Hong Kong as a destination for IPOs, which is an about face of prior policy that worked to undermine it, as an alternative to mainland China and as a way to boost the HKD. Tencent’s Ant Financial is said to be working on a public listing in Hong Kong with a secondary listing in China.     

The exception to this has been China’s largest semiconductor fabrication company, SMIC, a competitor to TSMC. The firm cancelled its planned US listing and re-listed on Shanghai’s Star board seeing its stock almost triple during its listing debut

There are currently 550 Chinese firms listed on US stock exchanges. Chinese firms accounted for one third, or $279 billion, of funds raised globally via public listings during the last five years — with just under half of this coming via New York listings.