Chinese podcasting platform Ximalaya has suspended plans for a Hong Kong listing after its attempt to raise up to $100mn was rebuffed by investors, who remain wary after Beijing launched a crackdown on foreign listings by homegrown groups over data security concerns.
Despite aiming for a sharply downsized fundraising target of between $50mn and $100mn, the Spotify-like platform — which is backed by Chinese tech groups Tencent, Xiaomi and Baidu, as well as Sony Music Entertainment — was undersubscribed, prompting it to hold off on proceeding with its initial public offering according to bankers and early stage investors.
Shanghai-based Ximalaya’s experience is a fresh example of how the path to going public remains bumpy for data-rich Chinese firms looking to tap new investors in Hong Kong and New York, as US authorities step up demands over audit disclosures and Chinese officials attempt to reel in overseas listings on cyber security concerns.
“The sentiment was so poor at this point that even Ximalaya failed to get enough investors on board,” said a Hong Kong-based IPO banker, adding that the Spotify-like service, valued at Rmb27bn ($4.02bn) in its last funding round, used to be relatively favoured among its peers.
Ximalaya had originally shelved a plan to list in the US after China’s top internet watchdog, the Cyberspace Administration of China (CAC) suggested holding off, according to a state-run investor in the company. That deal reportedly aimed to raise around $500mn.
The investor added the company had received the blessing of both the CAC and China’s securities regulator for a Hong Kong IPO, even though data security rules for a new offshore listings regime are yet to be finalised.
The company’s latest setback comes during a dire year for share sales in Hong Kong. New listings in the city have raised just $2.4bn in the year to date, according to data from Dealogic, reflecting a 94 per cent fall compared to the same period a year ago.
The high end of Ximalaya’s fundraising target, while modest by historical standards, was still well above the norm for 2022. The 19 companies brought to market in Hong Kong this year have raised just $94mn on average.
A different, early stage investor in Ximalaya said the company’s revived share sale had been pushed forward despite “substandard market conditions” in part due to exit demand from some of the company’s private equity backers. Ximalaya is also under pressure not to price shares lower than the level at which state backers bought in, they added.
It has been reported that the company is in discussions with a Shanghai government body which could take a special management stake, known as “golden shares”. Such shares, which provide government bodies with veto power over key decisions including going public, is one of many new practices regulators have established in recent years to inject greater influence of private companies that process a large amount of key data.
Another of the handful of Chinese companies seeking to test global investor appetite is Noah Holdings, a Sequoia-backed provider of private wealth management products. The firm is holding reverse roadshow meetings this week for a planned Hong Kong listing, according to a person familiar with the matter.
Ximalaya, CAC and the China Securities Regulatory Commission did not immediately respond to requests for comment.