Chinese Companies in the US Stock Market; how will they fare?
China is undoubtedly one of the United States’ most prized business partners. As a matter of fact, almost a hundred China-based companies are currently listed on either the NASDAQ or New York Stock Exchange market.
On Tuesday, two companies added to that list of Chinese firms operating in the US. Both Bright Scholars Education Holdings (NYSE: Pending) and NEWater Technology Inc. (NASDAQ Pending: NEWA) announced their IPOs in what seems to be a conducive month for IPOs.
Bright Scholars Holdings is the operator of one of China’s largest international and bilingual schools. Based in Beijiao, China, the company was founded over two decades ago to promote literacy in the country. Bright Scholars filed with the SEC to raise 200 million in its IPO. Bright Scholars didn’t disclose how many shares it’d be selling or for how much.
NEWater Technology is also based in China but manufactures water-filtering purifiers from its headquarters in Yantai. NEWater Tech, which made $12 million in sales in 2016 alone, is targeting a 7.2 million in revenue from the IPO. Its shares will go for between $4 and $6 per share, bringing its overall market value to $49 million at the midpoint. The sole underwriter will be Viewtrade Securities Inc. The Bright Scholars Holdings lead managers will be the joint Morgan Stanley, Deutsche Bank Securities, and China Merchant Securities (HK) team.
NEWater Tech and Bright Scholars Holdings are both successful companies in their own right back in the Chinese market. But the big question is, do they have what it takes to make it in the American market post-IPO? Below is an analysis of steps the firms can adopt to ensure that they are:
- Eyes off the Bottom Line
Most foreign companies forget that when it comes to the American market, it is ‘come to America and do what Americans do’.
For non-US-based firms to be successful in the US, they must first take their eyes off the bottom line. They must build reputations for professionalism before US investors can sink their money into the companies.
Take the example of CNOOC. The oil and gas Chinese magnate has been trading on the NYSE for years. This year, CNOOC experienced an alarming 18% in its shares while other oil companies’ stocks rose. One of the reasons for the steep stock decline is that oil prices for some of its investments were low. Another is that the company has poured capital into further asset acquisition but not invested enough in the American consumer. The American consumer in turn didn’t invest in CNOOC shares and the company ended up not having enough funds to recoup its losses.
- Partner up
An American partner for a foreign company sends a message to American investors that the US partner believes in that foreign firm. This endorsement will go a long way in convincing other related US businesses to trade with and invest in the Chinese company. Partnership allows foreign firms to get a foot in through the market door so to speak.
China Eastern and China Southern Airlines are proof-of-concept companies in that respect.