What makes a Chinese initial public offering Chinese? Shares of LianBio fell 14% on their first day trading in New York on Monday after raising $325 million. It touts a foreign domicile and U.S. backers but most of its business is in the People's Republic. Investors who once loved such hybrids have good reason to distrust them now.
and tightening cybersecurity rules . Last year, lawmakers in Washington passed legislation that would kick Chinese firms off U.S. exchanges if they fail to comply with American auditing standards. LianBio, which is the first Chinese issuer to return to New York since Didi, was seen by some investors as being more American and therefore exposed to less regulatory risks, according to financial publication IFR.
Yet the negative market reaction shows that doing things differently is not sufficient to distract from underlying risks. The company has yet to generate any revenue, but its model depends on it being a gateway for global pharmaceutical companies into China, where the majority of its operations and assets are. LianBio's prospectus flags a deluge of regulatory risks; indeed it may have needed Beijing's approval to go public abroad in the first place.
- The company, which is incorporated in the Cayman Islands and has headquarters and operations in both the United States and China, is the first Chinese company to go public in the United States since ride-hailing company Didi Global's $4.4 billion offering in June, according to Dealogic.Reuters Breakingviews is the world's leading source of agenda-setting financial insight.
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