In the News: Huge Hong Kong IPOs May Be Imminent; Chinese Drugmakers to be Affected as US Lowers Drug Prices; and US House Passes Trade Secret Theft Bill

CATL and Ant Group Plan Hong Kong IPOs

Fintech giant Ant Group and battery giant CATL are planning to list in Hong Kong—listings that could potentially break recent world IPO records, sources say.
 
The international arm of Ant Group, Singapore-incorporated Ant International, is in talks with Hong Kong and Singapore regulators about plans for a Hong Kong IPO, according to an exclusive Caixin report. Sources told the agency they have received indications that there are no policy obstacles to such plans as of now.
 
Alibaba has a 33% stake in Ant Group. Following a regulatory crackdown on fintech sector misconduct in 2020, Ant Group underwent a major restructuring in 2023 in which a key change was the ceding of founder Jack Ma’s voting rights from 53.46% to 6%. Under Hong Kong Stock Exchange rules, a company that experiences a change in its controlling shareholder must wait one year before listing. One year has passed, so Ant Group can now list in Hong Kong.
 
Hopes for a Hong Kong IPO increased last month when Bright Smart Securities’ chairman sold its 50.55% stake to Ant Group’s wealth management subsidiary.
 
According to Caixin, “Ant International is a global digital payment and financial technology provider operating “across Asia, Europe, the Middle East and Latin America.” It was restructured into an independent entity last year, and has contributed to an increasing proportion of Ant Group’s revenue, from 5% in 2020 to around 20% last year.
 
Meanwhile, the world’s largest battery maker, CATL, expects to raise at least US$4 billion in its Hong Kong IPO, which will price this week and start trading on May 20, FT reports. If this target is achieved, it would be Hong Kong’s largest-ever IPO and the largest IPO globally so far this year, surpassing JX Advanced Metals’ US$ 3 billion IPO in Tokyo in March. CATL could raise up to US$5 billion “if demand is strong and a greenshoe option—allowing underwriters to sell more shares than planned—is exercised.”
 
However, some U.S. investors are still debating whether to purchase shares of CATL, given the company was blacklisted earlier this year by the U.S. Department of Defense, which said it was affiliated with the Chinese military. Nonetheless, the company’s Hong Kong shares will be sold at a narrow discount compared to mainland Chinese shares of CATL, a sign of “strong investor demand.” 
 
According to SCMP, “CATL is among the 30 A-share companies that have submitted applications for H-share offerings in Hong Kong so far this year, surpassing last year’s total of 16.” Only five applications were submitted on average in previous years. An additional 16 are planning to list in Hong Kong. This follows from the Chinese regulators’ measures unveiled last year to support Hong Kong listings, and the Hong Kong Stock Exchange’s announcement this year that “it would expedite share sales by mainland-traded Chinese companies.”
 
More from CLP:
China tech IPOs: In the News: China Offshore Funding
Mainland IPOs in HKEX: In the News: HKEX Rebounds

Trump Orders Global Drugmakers to Lower US Drug Prices

On May 12, the Trump administration issued an executive order requiring drugmakers to set U.S. medicine prices in line with other countries.
 
Drugmakers are given price targets for the next 30 days and will face consequences if they do not make “significant progress” towards those targets once that period elapses. Trump has threatened tariffs if drug prices are not cut by 59-90%.
 
Prices of medicines in the U.S. are the world’s most expensive, often nearly triple those in other developed countries, Reuters reports.
 
According to an article by user “Kendall Square” on Pharmaceutical News, the order could affect the business model and profits of Chinese drugmakers selling to the U.S.
 
First, given many Chinese drugmakers sell to the U.S. through “licensing-out” deals with local companies, these deals may have to be renegotiated due to an expected sharp fall in revenue. For example, Chinese drugmakers may need to renegotiate a decrease in the upfront payment, milestone payments or royalty payments.
 
Second, U.S. pharma companies and distributors would be more sensitive to profit margins when choosing foreign drugs to sell. Chinese drugmakers will face intense competition from Indian and European manufacturers, forcing them to improve their products and give more bargaining power to the U.S. pharma companies with whom they cooperate.
 
Third, Chinese drugmakers will have to prepare for uncertainty. Trump’s order, despite having immediate effect, is vague on details and could face legislative and judicial hurdles. Trump could backtrack, while the Chinese authorities may take retaliatory action. This might mean, for example, slowing down the pace of dealmaking until there is more clarity.
 
However, Chinese drugmakers may also benefit from this order. If U.S. pharma companies are going to see profits fall dramatically, they may switch to buying cheaper Chinese substitutes, though those substitutes must meet high quality control standards.
 
As such, Xiangxiang Ma, life sciences partner at Anjie Broad Law Firm, told CLP that “the long-term impact of the New Order on China’s pharmaceutical sector will depend on both the policy’s durability and Chinese companies’ ability to adapt their business models.  While the immediate effect appears negative for innovative drug developers, the policy may ultimately accelerate China’s transition from a fast follower to a true innovator, as companies are forced to develop more competitive, globally differentiated products rather than relying on price arbitrage among various markets.”
 
More from CLP:
Chinese drug trial scrutiny: In the News: US Lawmakers Seek Increased Scrutiny of US Clinical Drug Trials in China
Pharma Sector Developments: Regulatory Developments in the China Pharmaceutical and Medtech Sector in 2024, and the Outlook for 2025

New Legislation Sanctions Economic Espionage by Foreign Adversaries

On May 5, the U.S. House of Representatives passed the Economic Espionage Prevention Act (EEPA), a bill designed to counter foreign theft of U.S. trade secrets and proprietary information. The bill now moves to the Senate Foreign Relations Committee for consideration, WorldECR reports.