China’s top property broker KE Holdings exploring HK listing

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China’s biggest housing broker KE Holdings is planning a Hong Kong stock market listing and has hired Goldman Sachs to lead a float, two people with direct knowledge of the matter told Reuters.

Beijing-based KE, which is backed by Tencent Holdings and SoftBank Group Corp, raised $2.1 billion in its New York IPO last year, making it the second-largest U.S. listing for a Chinese company at the time.

The company, which matches buyers and sellers of real estate, is now exploring raising a similar sum in a dual-primary listing in Hong Kong, said one of the sources. The listing could happen as soon as the end of the year, said the source.

KE is one of the so-called “platform” companies in China that control vast amounts of data and are now being subjected to an unprecedented regulatory crackdown by Beijing. KE‘s planned listing shows that such companies are still exploring fundraising opportunities in the Asian financial hub, despite a dour outlook for their shares in the current regulatory environment.

In an emailed response to Reuters, KE denied it was seeking a Hong Kong listing. “We have no imminent plan for (a) Hong Kong listing or any share sale,” it said.

Goldman declined to comment. The sources declined to be named as the information is not public.

KE shares rose 3.7% in pre-market trading on Tuesday.

A growing number of New York-listed Chinese firms have already either wholly or partially reduced their exposure to U.S. bourses by going private or returning to stock markets closer to home via second listings.

That move has been triggered by heightened scrutiny and stricter audit requirements for U.S.-listed Chinese companies from American regulators amid political tensions between the countries.

Investment banks other than Goldman that worked on KE‘s New York IPO are pitching for roles in the Hong Kong listing, said a separate person with direct knowledge.

Reuters reported in May that China’s market regulator had begun a probe into suspected anti-competitive practices by KE, investigating whether the company forced real estate developers to list housing information only on its platforms.

China has also stepped up its scrutiny of the real estate market. KE warned last month that its third-quarter net revenue could drop by up to nearly 30% due to tighter market regulation.

Its shares quadrupled from the $20 issue price in August last year to nearly $80 in November but have since tumbled to the current level of $18.98. At that price, KE has a market capitalisation of $22.6 billion.

VOTING POWER

KE started with property brokerage brand Lianjia 20 years ago and grew into one of China’s largest bricks-and-mortar property agents and later set up Beike as a separate online housing platform matching buyers and sellers, renters and landlords, as well as providing home finance.

Like many other offshore-listed Chinese internet firms, KE has a weighted voting rights (WVR) structure. Its late founder and chairman Zuo Hui controlled the company with his Class B shares that carry WVR.

Zuo owned such shares via a trust that gave him 77% voting power. After Zuo’s death in May, his immediate family members, who don’t sit on KE board, have become the beneficiaries of the trust, according to the company’s filing in July.

That could pose obstacles to its Hong Kong listing, said one of the sources and another person with knowledge of the matter, as Hong Kong listing rules require beneficiaries of WVR to be members of the applicant’s board of directors.

Both sources said one solution could be if Zuo’s family members agree to convert class B shares, which are entitled to 10 votes each, to class A shares with only one vote each, thereby significantly curtailing the family’s voting power.

One of them added the family members have yet to make up their minds on this and the deal might not take place later this year.

Reuters

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.