US-Listed Chinese Unicorns Take Public Market Drubbing

Delayed Morning Markets: It’s a bad day to be a China-based company listed on an American exchange, here’s why.

The number of China-based technology companies listing on American exchanges was a recent market narrative. You recall the Huya IPO, the Nio deal that we never really got, and Luckin Coffee’s meteoric rise. Heck, don’t forget 9F, Viomi, and even DouYu (more here, here, and here, respectively).

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Looking back through our coverage is good reminder that a swath of China-based tech and venture-backed shops chose the U.S. markets.

Individually, of course, the debuts have been a varied mix of success and failure. Normal stuff. Today, however, there is a sharp, downward trend to most of the companies in question and the why isn’t good news. Here’s Bloomberg:

Trump administration officials are discussing ways to limit U.S. investors’ portfolio flows into China in a move that would have repercussions for billions of dollars in investment pegged to major indexes, according to people familiar with the internal deliberations.

The same report goes on to note that the current American government is also discussing “delisting Chinese companies from U.S. stock exchanges and limiting Americans’ exposure to the Chinese market through government pension funds.” The moves, in aggregate, could put negative pressure on China-based companies listed on American exchanges.

It’s Friday, so I’m going to avoid the usual throat-clearing. This is probably pretty stupid. The Chinese government is anti-democratic, increasingly autocratic, opposed to religious freedom, and is currently erasing an entire culture in Xinjiang. But that doesn’t mean that closing economic ties between our respective capital markets will make those situations any better. Indeed, it probably makes them worse; isolating a rival power isn’t a way to influence its actions if it has access to other markets.

Trade wars were said to be easy to win. Instead, we’re now seeing American investors take hits to their portfolios as the current administration looks to find leverage to summon even a small win.

The moves will limit the listing-pace of China-based companies on U.S. exchanges, making our domestic capital markets more provincial and less global. Meanwhile, the LSE is doing this. Consider today, therefore, a coda of sorts on the boom in Chinese tech and venture-backed listings here in the United States.

Viva la self-inflicted wounds.

Illustration: Dom Guzman.