China crackdown dingdong: Dingdong, Manbang, Miss Fresh take IPOs to the US

By Elles Houweling

It appears to be high season for Chinese tech initial public offerings (IPOs) in the US. Grocery delivery platforms Dingdong and Miss Fresh filed to go public with the US Securities and Exchange Commission recently. Meanwhile, Uber-like trucking startup Manbang raised $1.6bn in its New York Stock Exchange (NYSE) debut on Tuesday, making it one of the year’s biggest IPOs by a Chinese company.

Upon listing on the NYSE, Full Truck Alliance – known in China as Manbang – saw its value rise 13% on its first day of trading. The American depositary shares, after rising as much as 20% on Tuesday, closed at $21.50, giving the company a market value of about $23.6bn. Backed by SoftBank and Tencent, Manbang sold 82.5m shares in its IPO at the top end of the marketed range of $17 to $19 apiece.

The company runs an app matching truck drivers and merchants needing cargoes moved, and provides financial services to truckers. Manbang formed in 2017 from a merger between rivals Yunmanman (literally meaning full of luck) and Huochebang (literally meaning truck help) at a time when China’s ‘sharing economy’ craze began to see consolidation and shakeup.

Hungry for food delivery IPOs

Chinese unicorn Dingdong, backed by SoftBank Vision Fund II, announced on Tuesday that it was aiming for a more than $6bn valuation on the NYSE. The valuation represents a jump of over 20% from the $5.1bn the company was worth after the Japanese conglomerate invested in it last month.

On the same day, Chinese competitor Miss Fresh, backed by Tencent, also announced its plans to go public in the US. The company is planning to raise as much as $336m, which is expected to value the company at up to $3.8bn at the top end of the range.

Both companies operate ecommerce platforms that offer delivery of fresh produce, including fruits, vegetables, dairy products, meat and beverages.

The Covid-19 pandemic has fuelled the demand for fresh produce home delivery in China, which resulted in a boom in business for Dingdong and Miss Fresh. Other competitors, including Alibaba and Pinduoduo, are also competing aggressively to grab a slice of the market.

IPO Journey to the West

The appetite for Chinese tech companies on US stock exchanges shows no sign of decrease despite delisting risk and geopolitical tensions. A record 143 mainland Chinese companies completed an IPO in the first three months of 2021, amassing $23.6bn of funds, the South China Morning Post reported.

This week, online alternate reality app Soulgate also filed to go public in the US, planning to raise $185m from a sale of American Depositary Shares. However, on Wednesday, the company announced that it had suspended its debut.

Considering that the company has increasing operating losses and cash burn, it might have faced a grim start in the US IPO environment. While the stock might have drawn interest from short-term traders, the Soulgate isn’t particularly close to breaking even, which likely the reason behind the suspension. On Wednesday, major backer Tencent said it supported the decision.

Meanwhile, investors are still awaiting Chinese ride-hailing app Didi Chuxing’s IPO, which is expected to be one of the biggest listings this year. Earlier this month, the company filed to go public in the US. Although it did not disclose the size of its raise, it is suspected that Didi could raise around $10bn, placing its valuation somewhere between $70bn and $100bn.

ByteDance – the company behind TikTok – is also expected to go public in the US this year, in what will likely be one of the largest IPOs in 2021.

The move of Chinese tech companies to the US is partially fuelled by Beijing’s aggressive clampdown on big tech firms. Recently, regulators ordered China’s 34 most prominent tech companies to rectify their anti-competitive behaviour.

“China is becoming ever more centralised and mercantilist behind plans for a digital yuan and national blockchain,” explains Michael Orme, GlobalData Thematic analyst and China specialist.

For some time, experts have been worried about a growing Chinese tech bubble. However, recent IPO success stories, including JD Logistics and Kuaishou, show no indications of the bubble popping anytime soon. Instead, a proliferation of Chinese tech IPOs in the US is more likely the result of Beijing’s regulatory crackdown.

However, Orme points out that Didi Chuxing may be a different story. “Although heavily regulated in China, it poses no political threat to Beijing. However, it does run fintech service operations, which any investors in an IPO would need to factor into their risk analysis,” Orme said. “That all looks a bit bubbly and hazardous to me,” he added.

Investors should, however, keep their eyes and ears open for a potential super IPO by fashion supremo SHEIN. Reportedly, the Chinese fast-fashion company is preparing for a $47bn debut in what could be the largest listing in history.

According to Orme, an IPO of that magnitude would be something categorically different

“No Beijing regulators or threats to Xi insight and one of the world’s zippiest businesses.”