Kingsoft, China-based internet and software company, is spinning off its cloud division and would list it on Nasdaq on Thursday.
The company would issue 25 million ADS (American Depository Shares) with an option to issue another 3.75 million shares if the overallotment option is exercised. The overallotment option gives the underwriting banks a leeway to offer more shares than originally planned.
Each ADS is expected to be priced between $16 and $18 and Kingsoft plans to raise between $392m to $451m from the offering. Kingsoft expects its shares to begin trading on Friday the day after pricing the IPO (Initial Public Offering).
Incidentally, another Chinese company Oriental Culture Holdings, operates an online marketplace for artists and collectors in China, is also looking to raise $20m from a US IPO.
Kingsoft IPO comes at a difficult time for Chinese firms looking to list on US markets. Firstly, US stock markets are down sharply this year. Even online accommodation booking platform Airbnb has apparently shelved its IPO plans for now and instead gone for private funding raising $2bn from investors last month.
Secondly, there is tension in US-China ties as the Trump administration over the spread of the coronavirus pandemic as security concerns over the role of telecoms giant Huawei and its stake in 5G networks in the West. This has led to growing disquiet against China in many countries including the US. Billionaire investor Ray Dalio last week said many American companies shifting some of their production away from China following the health emergency.
Finally, last month only Luckin Coffee announced an $310m accounting fraud that could dent US investors’ sentiment towards Chinese stocks. Trading was halted in Luckin Coffee stock last month after the sharp fall. Wolfpack Research recently accused video streaming business iQiyi, a spinoff of Chinese company Baidu, of fraud and inflating its financials by between $1.13bn and $1.98bn last year.
US Securities and Exchange Commission Chairman Jay Clayton last month cautioned investors that disclosures from companies in emerging markets like China “substantially greater risk” of being “incomplete or misleading.”