China tops IPO exits in 2022

Despite the weak global listings landscape, private equity-backed listings in Greater China hit an all-time high in 2022, accounting for 82% of the total value of deals worldwide.

Private equity-backed listings in Greater China hit an all-time high of $19.5bn in deal value in 2022, despite the lackluster global listings landscape. Last year the number of IPOs of private equity-owned companies was on par with 2015’s record of 38 deals, but the value was more than double (Fig. 1). While the value was inflated by China Mobile and CNOOC, which transferred their listings from the US, China's markets remain buoyant compared with other countries. The two companies are counted in Preqin data because they have private equity shareholders.

As a proportion of global aggregate deal value, private equity-backed IPOs in Greater China have exploded, reaching 82% in 2022 from only 6% in 2021.

Similarly, venture capital-backed IPOs in Greater China accounted for 89% of global total proceeds in 2022, up from 33% in 2021. The increase in global market share came despite a halving of aggregate value to $35.7bn in 2022, from $79.2bn in 2021. That said, 2022 still marks the third highest total capital raised by VC-backed companies in China.

The 2022 listings show a clear trend despite an IPO winter that enveloped most markets. Loose monetary policy at home and uncertainties for Chinese companies listing in the US have led more to list domestically, even as the Chinese economy comes under mounting pressure from COVID-19 restrictions.

This has resulted in China’s A-share market, an onshore market largely available to domestic investors and some foreign investors with licenses, becoming the world’s largest for IPOs in 2022. Venture-backed IPO aggregate deal value in North America and Europe as a proportion of the global total plunged from a combined 55.1% in 2021 to 5.2% in 2022, while the private equity-backed IPO equivalent fell from 75% in 2021 to 10% in 2022.

Largest PE-backed IPOs in Greater China in 2022

China Mobile’s blockbuster $7.6bn listing on the Shanghai Stock Exchange on January 4, 2022 was the largest IPO in China since 2018 and the biggest in the telecoms industry for over a decade. The listing of the state-owned mobile operator, the country’s largest wireless carrier by revenue and subscribers, comes after it was added to the investment blacklist on national security grounds and delisted from the New York Stock Exchange (NYSE) in May 2021. 

In 2022, China Mobile’s Shanghai listing became the world’s largest PE-backed IPO. China's three largest PE-backed IPOs last year were also the world’s three largest IPOs.

Taking the second spot is China state oil giant CNOOC, which raised $4.4bn from the highly-anticipated A-share issuance on the Shanghai Stock Exchange in April 2022 after delisting from NYSE in October 2021 under US sanctions. 

The IPOs of China Mobile and CNOOC offered partial exits for financial institutions such as private equity firms, sovereign wealth funds, and corporate investors. Both homecoming listings were due to political reasons related to US sanctions. Without these two large offerings, the value of private equity-backed IPOs in Greater China would still have reached a record high of $7.5bn in 2022. This would have taken the percentage of global private equity-backed IPOs in Greater China, excluding China Mobile and CNOOC, to 64%, rather than the 82% mentioned previously.

Third place goes to Ganzhou Teng Yuan Cobalt New Material’s $850mn IPO in March 2022 on the Shenzhen Stock Exchange. The Chinese non-ferrous metal producer manufactures cobalt and copper, both in high demand as raw materials for electric car batteries.

Geopolitical tensions between China and the US, including the great decoupling, are likely to increase domestic listings as Chinese companies struggle to secure funding in the US, while facing scrutiny from Chinese regulators when attempting to list their businesses overseas using a Variable Interest Entity (VIE) structure.

Largest VC-backed IPOs in Greater China in 2022

In 2022, venture capital-backed companies in Greater China had fewer successful exits than private equity-backed companies. The volume of IPOs and aggregate total value for venture capital-backed companies in 2022 was lower than in the previous two years (Fig. 3). 

This should not come as a surprise, as investor sentiment in the global venture capital market significantly shifted, reducing risk appetites, especially for late-stage, growth, and pre-IPO investments. This was due to concerns about rising inflation leading central banks to adopt a more hawkish stance. Nevertheless, venture capital IPO activity across China continues to hover above pre-pandemic levels.

In August 2022, Shanghai United Imaging Healthcare raised $1.6bn in an IPO on China’s tech-focused STAR Market, crowning it as the largest venture capital-backed listing of the year in the country. The diagnostic imaging device manufacturer is the biggest domestic player in its field and commands a leading position in its sector.

Two months later, Chinese battery maker CALB raised the second-largest Greater China listing in a $1.3bn trading debut on the Hong Kong Stock Exchange in what would be the territory’s worst year for IPO proceeds since the financial crisis.

The third spot goes to Hubei Wanrun New Energy which raised $900mn after being approved by China’s securities regulator to list on STAR market.

Greater China IPOs to watch out for in 2023

With China's reopening in full swing, major deals are poised for the Greater China region this year following the strong start to 2023. Some notable private equity-backed IPOs this year include Asian insurer FWD Group Holdings, backed by Hong Kong tycoon Richard Li. The company plans to raise around $1bn in a Hong Kong listing as early as the first quarter of this year after delaying its float due to weak market conditions last year.

Other Hong Kong listings to keep an eye on include Chinese ride-hailing companies seeking IPOs, including Ruqi Mobility. The Chinese state-backed automaker GAC Group's ride-hailing unit is known to be currently working with stakeholders on its first-time share sale. Cao Cao Mobility, backed by Zhejiang Geely, is also said to be eyeing a Hong Kong listing as early as April 2023. Lastly, the highest-profile IPO in the pipeline might be Didi Global's Hong Kong listing after it delisted from the NYSE last year. 

This year, consultancy firm PwC forecasts an IPO resurgence in Hong Kong, with an anticipated 100 new listings and total fundraising almost doubling to HK $200bn. This goes beyond companies backed by private equity and venture capital, and it could propel the city back to the forefront of IPO activity, re-establishing its reputation as a premier destination for companies to go public. Within mainland China, PwC expects a robust pipeline of 400-460 IPOs to come onto the A-share market, raising a record RMB 590-652bn in 2023.

In the A-share market, venture capital-backed IPOs have traditionally been from electronics, materials, and biotechnology companies. However, for the first time in history, semiconductor companies became the second-most popular sector for IPOs last year. The semiconductor industry has been at the heart of the technology dispute between the US and China, with both countries battling for control over chip technology. 

This year's pipeline for Chinese IPOs is looking robust as market sentiment improves, driven by the reopening of Hong Kong and the mainland boundary and economic stabilization policies, prompting the public equity market to pick up.