Lufax, one of China’s largest online lenders, raised $2.36bn in one of the biggest US stock market listings this year, a sign of the enduring allure of a New York listing for Chinese businesses despite the charged political situation between the two countries.

The Shanghai-based company’s shares slid as much as 14 per cent in their first minutes of trading on the New York Stock Exchange on Friday, as the broader stock market declined, although they had recovered to trade flat by early-afternoon.

Lufax sold 175m American depository shares at $13.50, at the top of the range marketed to investors, valuing it at $32.9bn.

Lufax was founded in 2011 and is backed by the Ping An Insurance Group, one of China’s largest private companies. It focuses on consumer and small business lending and its wealth management arm targets China’s emerging middle class by linking fund managers with more than 12m local investors.

The company had net income of $1bn in the first six months of the year.

“We still felt the US was the right place to start for us in terms of getting the right investor exposure, getting the best analyst coverage, and the broader branding that comes with it,” Gregory Dean Gibb, Lufax chief executive, said in an interview with the Financial Times.

Column chart of Proceeds from IPOs in the US by Chinese businesses ($bn) showing Chinese companies raise most in US stock market listings since 2014

Heightened tensions between Washington and Beijing have spilled over into capital markets this year with officials from the Trump administration discouraging US investment in some Chinese companies and calling for reforms targeted at Chinese companies listing in New York.

READ ALSO  Bill Browder threatens legal action over Swiss bank accounts linked to Magnitsky scandal

US securities regulators and policymakers have zeroed in on how Chinese-based groups are audited after the accounting scandal at Luckin Coffee. In May, the Senate passed a bill that would require Chinese companies to comply with US accounting rules.

China does not allow auditors in the country to share their work with foreign regulators.

Some large Chinese companies have spurned the US in favour of a domestic IPO. Ant Group, the Alibaba-linked payments company, chose a joint listing in Hong Kong and Shanghai, where it will raise more than $30bn in the biggest IPO on record next week.

Lufax is the fifth-largest IPO in the US this year, according to data provider Dealogic. Excluding the blank cheque company offerings that have dominated the US listings business this year, the Lufax IPO could rank as the second-largest in the US if underwriters sell additional shares in the coming days, trailing only cloud database provider Snowflake.

If bankers do sell those shares, as they traditionally do, it would also be the largest US capital raising by a Chinese-based company since Alibaba’s $25bn in 2014, Refinitiv data showed.

Line chart of Share price ($) showing Lufax shares drop at the open before rebounding

Via Financial Times