Why Chinese Tech Companies are going IPO this year with Shai Oster

Shai Oster, Asia Bureau Chief from The Information joins us in a conversation on why Chinese technology companies are frantically going IPO this year and what it means for the Chinese market and the rest of the world. We begin our conversation with the upcoming subscriber event from the Information in Asia on Nov 12,  the recent news on the prominent Google mafia in China and the state of Chinese electric cars market. Shai shared his thoughts on why Chinese technology companies are now rushing to take themselves public and how the recent trade war coupled with the recent dumping of technology stocks may change their calculus in the short term.

Here are the interesting show notes and links to the discussion (with time-stamps included):

• • Shai Oster (@beijingscribe, LinkedIn, TheInformation Profile), Asia Bureau Chief in The Information [0:20]
    • Since our last conversation, what have you been up to? [0:25]
    • The upcoming subscriber event in Hong Kong on 12 Nov 2018. [0:55]
    • A request from our host to have a subscriber event in Singapore for Southeast Asia [4:02]
    • A Google Diaspora shapes China’s tech scene: How has the former employees from Google (and to some extent from Microsoft earlier) shaped China’s tech scene? [5:20]
    • Why China’s Electric Car Market is falling short: Why has China focused so much in electric car market? How are the Chinese electric car makers compared against their competition from US (Tesla), Japan (Nissan) and Germany (VW Group, Daimler)?  [9:33]
  • Why Chinese Companies are going IPO in droves and its implications [17:20]
    • Introduction: Based on Forbes, Chinese tech firms are rushing to tap public markets, offering to sell $8.5 bln worth of new shares so far this year. Reference: Why Chinese’s Tech Companies are rushing to go public this year
    • To help my audience, let’s start by setting the baseline of the conversation, what does it mean for a company to go public? [17:50]
    • How the IPOs driven by Chinese tech companies returning liquidity back to the market and generate more VCs, entrepreneurs and money back into the ecosystem [21:39]
    • Recently, many tech companies in China, for example, Xiaomi, Meituan-Dianping, Pinduoduo, ByteDance are going IPO. Xiaomi and Meituan Dianping are around for 10 years but companies like Pinduoduo and ByteDance are pretty young companies to do that. What is the calculus behind their decisions to go public? [23:24]
    • How about ByteDance (the holding company behind Toutiao, Douyin and Tik Tok)? Why are they rumored to go IPO now as well? [25:35]
    • Does the choice of the public stock exchanges (NASDAQ, NYSE, HKSE, SGX) matter to how these Chinese tech companies go IPO? [28:59]
    • Xiaomi and Meituan-Dianping have gone public in HKSE but did not do very well as it is still trading below the starting IPO price. Will it have an impact to other companies going public at HKSE in the near future? [Ref: Got shares in a Blockbuster IPO? Dump them Quick] [31:05]
    • Is HKSE a better destination for IPO given that the investors understand what a Xiaomi phone or have used Meituan Dianping as a super app? [32:09]
    • The HK stock exchange has recently changed the rule of companies having the ability to provide dual class shares and the Chinese tech company’s shares are not doing well, will the investors look back to NYSE or NASDAQ if it does not work out or there may be a cultural change of attitudes towards tech company stocks in the future? [Ref: Hong Kong’s Tech Dreams are becoming a nightmare] [34:17]
    • Shai’s comments on whether founders and management teams should have dual class shares so that they can either push thru the execution of the vision by the founding or management team. [35:57]
    • In the past few weeks, exacerbated by the trade war and massive dump of China tech stocks, what does it mean for the rest of the Chinese companies going public? [37:49]
    • Is there a second market equivalent for founders and employees to sell their stock in private from China? [39:55]
  • Closing [40:29]
    • Can you recommend a book, podcast or anything else that has impact to your work and personal life recently? [41:00]
      • Shai’s recommendations: Sound Opinions, Soul and funk music, Duncan Clark “Alibaba: The House that Jack Ma Built“, Kai-fu Lee’s “AI Superpowers“
    • How do my audience find you? [42:05]

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The show is hosted by Bernard Leong (@bernardleong & weibo) and are sponsored by Ideal Workspace (Twitter, Facebook and LinkedIn) with their new Altizen Desk (Twitter, Facebook, Medium). Sound credits for the intro music: Taro Iwashiro, “The Beginning” from Red Cliff Soundtrack.