Chinese game developer NetEase is set to kick off the sale of up to $2.5 billion in new shares in Hong Kong on Monday, in what would be the biggest stock offer in the city so far this year.
But NetEase’s offering is likely to be overtaken by that of Chinese online shopping service JD.com, which plans to seek up to $3 billion a week later.
Both companies are already listed in New York, but secondary listings in Hong Kong will give them flexibility amid moves by U.S. politicians that could force some Chinese companies to delist amid growing tensions between the two countries.
The U.S. said this week that the adoption of a national security law for Hong Kong, which Chinese officials approved on Thursday, could jeopardize the city’s special trade status with Washington.
The secondary offering plans were approved by the Hong Kong Stock Exchange’s listing committee on Thursday.
NetEase will price its offering on Friday and make its Hong Kong debut on June 11, while JD.com would begin trading on June 18, people familiar with the transactions said. JD.com could raise about $3 billion, they said.
The two share-sale transactions would be the first to exceed $1 billion in Hong Kong since Alibaba Group Holding’s $13 billion offering last November.
Hong Kong, which was the largest listing destination globally last year — and in seven of the past 11 years — with $40.24 billion, is fifth so far this year with just $3.4 billion raised, compared with $5.82 billion in the same period last year, according to Dealogic.
The transactions come as U.S. senators this month approved a bill that could force Chinese companies to delist from American stock markets if they fail to comply with the country’s regulatory audits for three consecutive years.
The bill, if passed into law, would likely accelerate the dual-listing trend in Hong Kong as 29 mainland companies with a total market value of $370 billion are eligible, according to Goldman Sachs.
NetEase and JD.com plan to sell stakes of about 5% each in Hong Kong. Spokespeople at the two companies declined to comment on their secondary listing plans.
“Despite the uncertainty out there, these offerings should be well bid. At least, the preliminary discussions with investors give us confidence,” one of the persons familiar with the deals said.
NetEase, which is valued at $49 billion on the Nasdaq Stock Market, is expected to invest the proceeds on expansion and other online services, such as music streaming and online education. Credit Suisse, China International Capital Corp. and JPMorgan Chase are among the lead arrangers for the offering.
JD.com has a market valuation of $65 billion and aims to raise $3 billion. It plans to invest the funds it raises to shore up its position in a competitive market, which includes Alibaba. Its expected Hong Kong market debut will coincide with its largest online sale event. Bank of America, CLSA and UBS are advising JD.com on the offering.
The two deals are the first secondary listings in the city since Alibaba’s offering last year. A rule change by the Hong Kong Stock Exchange in 2018 to allow companies with dual-class shares to list is paving the way for mainland companies to seek a listing closer to home as the U.S. clampdown intensifies amid rising tensions with Beijing and an accounting fraud scandal at Nasdaq-listed Luckin Coffee.
As a result, more companies could follow. Search giant Baidu, which went public on the Nasdaq in 2005, also is exploring a similar approach as it weighs a delisting from the Nasdaq, said a person with knowledge of the matter.
Additional reporting by Coco Liu.
This article was first published on Nikkei Asian Review.