Page 87 - Bloomberg Businessweek July 2018

SPONSOR CONTENT SPONSOR CONTENT

Mythical Beasts and transactions, and Internet lending Number of unicorn companies The 98 Chinese unicorn companies
Unicorn Companies
platforms’ efforts to protect personal data
and fend off fi nancial risks, said Gao.
involve 16 industries
“Moreover, as established unicorns that
thrive by adjusting their business models
continue to expand their territories, India
Others 10
China is home to the second­most unicorn companies in the world fl edgling companies may fi nd themselves 388
3
squeezed. On the fl ip side, if technology
with the top three industries
By Deng Yaqing will likely be outstripped by industry new-
companies fail to grow fast enough, they
United Culture &
States China E-commerce Finance
comers with greater momentum,” said Li. entertainment
China’s new-look economy is gaining “However, the strict requirements and environment in which a host of small and 106 98
high threshold for getting listed in the Further opening up
momentum. With a focus on entrepre- medium-size companies reside,” said Li.
neurship and innovation, a cluster of domestic market and the American
A unicorn also needs to maintain a leading There is no doubt that the Chinese
privately owned and rapidly growing start- stock market’s lukewarm attitude toward
position in a certain segment of the mar-
government wants to see successful
ket and dig deeper into this area rather
ups have provided a boost for the country Chinese fi rms have long denied these accounting for 46% of the total.
as it undergoes a momentous shift in the companies choose to go public in the
companies the opportunity to raise capital than blindly seeking expansion, so that it mainland or Hong Kong markets, so that
drivers of growth.
in the secondary market. They have no
can develop superior services and prod-
In terms of valuation,
Chinese people can share in the rewards Of the world’s top 10 unicor n
choice but to fi nance in the primary mar-
According to a study recently released by ucts to better satisfy market demands,
of the new economy.
companies, these three industries
Deloitte, by the end of June 2017 there ket, which explains the birth of so many said Gao.
“In the past, the strict requirements and
unicorns,” Wang continued, predicting
were 252 unicorns—startup companies Autonomous driving Hardware
Finance
At the heart of a unicorn’s competitiveness
extensive restrictions of the A-share
that an increasing number of Chinese uni-
valued at over $1 billion—worldwide, with is its ability to address the urgent needs
106 in the United States and 98 in China, corns will seek to issue IPOs in the Chinese market deterred numerous unicorns from
mainland and Hong Kong markets as their of consumers, Gao added. Take shared attempting to get listed at home. Now,
far surpassing the fi gures for any other with the threshold lowered, a new trend of
businesses grow. bikes, for example: The companies offer- five are from China:
country.
ing this service do not rely on particularly
rank at the top,
domestic IPO applications is taking shape,
Ant Financial Services Group
“China’s innovation capacity is now largely advanced or hard-to-come-by technology, and the international competitiveness
Core competitiveness but they have managed to provide a Didi Chuxing accounting for
on par with America’s, which is refl ected
of China’s capital market will be further
Innovation and a favorable business en- Xiaomi
by the robust growth of Chinese unicorns. popular service that people need, and the improved,” said Li.
demand is virtually inexhaustible.
vironment have set the stage for China’s
Most of these companies are excellent Lufax 30%
performers and frontrunners in their re- “Competition here is more brutal and Conversely, CDRs usually fi nd their way
new era of fast-growing unicorns. Yet, Meituan-Dianping
into developed and mature fi nancial
of the total estimated valuation
spective fi elds,” said Albert Wang, founding
fi erce than in the American market, so
partner at Maintrend Capital and former a fast-learning team is indispensable. markets, and the issuance of CDRs in do-
while some of the top companies in this
partner at SAIF Partners, in an interview group will fi nd success in the secondary mestic stock markets necessitates higher of Chinese unicorn companies.
Financing capacity as well as shareholder
with Beijing Review. requirements for supervision, access to
market, other less competent ones could
structure also play important roles. In
lag behind or even collapse.
information and investor protection.
On May 3, Xiaomi, a Beijing-based unicorn some cases, companies that provide
“Besides the ability to attract capital,
Starting June 7, qualifi ed innovative fi rms
heavyweight specializing in consumer products and services of the same quality
unicorns need to foster and maintain Source: Deloitte.
can submit applications for CDR issuance
electronics, fi led to go public in Hong experience totally different outcomes
the ability to innovate in order to survive, to the CSRC under the new pilot CDR Designed by
Kong, where its IPO could raise about due to disparities in the above-mentioned
$10 billion in the largest listing globally in which focuses more on integration and areas,” said Wang. program. The CSRC has said it will strictly Pamela Tobey.
almost four years. making use of various market resources control the number of enterprises and
the volume of funding for the pilot CDR
than sticking to the development of a listed in the A-share market will carry out entrust their money to institutional inves-
Potential challenges
Chinese mainland and Hong Kong securi- program, and properly arrange the timing
certain technology in the laboratory,” Gao tors that are more professional, rational
ties regulators are sparing no effort to additional issuance. It is beyond the capac-
Yuning, an associate professor with the “Funding and innovation are two essential and pace of CDR issuance.
ity of the present capital market to fi ll the and better equipped to withstand fl uctua-
improve their listing policies to attract
School of Public Policy and Management tions and risks,” said Wang, adding that
factors for corporate growth. However, “By learning from more mature overseas gap in capital demand,” said Li, noting that
unicorn companies. On June 6, the China at Tsinghua University, told Beijing Review.
excessive fi nancing and innovation may the country should also allow more private
efforts need to be made to increase the
market, China should establish a com-
Securities Regulatory Commission (CSRC)
generate bubbles that, once they burst, supply of funds. and overseas money to enter the stock
Such innovation can involve a variety of prehensive fi nancial supervision system
market.
issued rules for a test run of the issuance
may affect the confi dence of entrepre-
technologies including those not neces-
featuring cross-market and joint opera-
neurs, investors and governments,” said
and trading of Chinese Depositary Receipts To address the problem, China needs to
sarily developed by China, which can “However, the steps toward opening up
tion,” said Gao, who also emphasized the
Wang.
(CDRs). The securities regulator has also broaden its capital sources by allowing
nonetheless be consolidated by Chinese protection of intellectual property rights
should be in line with China’s current
more overseas funds to fl ow into its stock
released amended rules on IPOs, and a
unicorns in an effi cient way to form new, and the release of more tax credits to
As the struggle among platform com- economic stature and global investors’
market. According to Wang, in the process
package of measures to support unicorn
secure and effective business models.
encourage innovation.
panies continues, competition over confi dence in the country. Otherwise,
of enabling unicorns to go public at home,
companies in their domestic issuance
consumers’ attention and business is “More efforts should be made in opening the Chinese authorities should push for problems may occur,” said Wang, citing
of stocks or CDRs. Meanwhile, the Hong “A unicorn should be able to grow into
intensifying.
Kong Stock Exchange is now permitting a platform company rather than relying up, such as allowing cross-border capital the free convertibility and internationaliza- rampant speculation on the Thai baht
tion of the yuan, and press ahead with the and Russian ruble,
innovative, high-growth companies to list entirely on a single technology, and only and profi t fl ow for fast-growing privately
“What matters is whether a company can
which he believes was
using a dual-class share structure, which in this way can such a company realize opening up of China’s stock market.
create the value that consumers really held companies,” said Gao, who expects
sustainable and rapid development,” Li these enterprises to enjoy the same equal the consequence of
Xiaomi was the fi rst to apply for.
need. Here value means not economic
disproportionate open-
At the same time, investor structure
Lixin, Managing Director of Northern Light benefi t, but knowledge, entertainment, treatment and preferential policies as should be optimized. “In China’s mainland
“Increasing consumption capacity, ing up. ■
Venture Capital, told Beijing Review.
relaxation and so on,” said Gao. foreign-funded companies.
improving productivity and abundant stock market, about 80 percent of players
entrepreneurship have provided the Alongside market value, requirements are private investors, while in overseas
“Many great companies that have gone on “As more Chinese unicorns look to go
markets, the majority of market players
necessary conditions and resources for
to be listed are platform companies, such for corporate social responsibility have public by issuing CDRs in the mainland
steadily risen, as seen by Didi Chuxing’s market, there will be a huge demand for are institutional investors. It follows that
Chinese companies to grow and prosper,”
as Alibaba, Tencent and Didi Chuxing. Such Scan QR code to visit Beijing Review’s website
Wang said. supervision over its ride-sharing drivers
a company represents a certain business capital, while giant companies currently private investors should be encouraged to Comments to zhouxiaoyan@bjreview.com