HONG KONG, Dec 13 (Reuters Breakingviews) - It’s a bold company that seeks more rules to follow when so many complain about the costs of complying with any one set. Biotechnology firm Beigene (6160.HK) this week will become the first to trade its shares in Shanghai as well as in Hong Kong and New York, where it first floated. Yet the globally minded Chinese firm may not have too long to enjoy its financing riches if geopolitics don’t improve.
Beigene’s west-to-east capital journey symbolises how far China’s capital markets have developed. The 11-year-old company’s 2016 initial public offering on Nasdaq wasn’t then possible back home, where money-losing firms were frowned on. Officials have since softened towards the idea of “pre-profit” firms, enabling the cancer specialist to sell shares in Hong Kong in 2018 and now Shanghai’s STAR Market , where it has raised another $3.3 billion. All told, since 2016 Beigene has sold shares worth $8 billion.
Having three listings suits the $29 billion biotech company’s view of itself as a global firm read more with 7,700 workers in 20-plus countries as well as headquarters in Switzerland, China and the United States. It’s an enviable position and helps with attracting talent as well as investment, although the costs and risks of complying with three different sets of rules are not insignificant. There’s a reason few companies go beyond one, or in some cases two, main listings.
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The danger is that Sino-U.S. tensions won’t allow it the luxury for long since Beigene’s main auditor is Chinese. That puts its Nasdaq shares at risk under a U.S. law, finalised this month, that will force the delisting of companies whose auditors cannot be overseen by U.S. watchdogs for three consecutive years. It is one of some 270 firms, per analysts’ estimates, that could be forced out from 2024.
China has consistently blocked regular access to mainland work papers. Companies are seeking workarounds and Beijing officials have said negotiations continue, although more than a decade of on-off talks on the issue hasn’t so far produced a resolution.
Losing a Nasdaq listing wouldn’t be the end of the world, although it would mean a loss of prestige that would make appearing global just that bit harder. But if it does happen, then Beigene’s foresight in adding a third listing so early could ultimately far outweigh any costs from doing so.
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CONTEXT NEWS
- Shares in $29 billion Beigene start trading on Dec. 15 on Shanghai’s start-up friendly STAR Market, where the Chinese biotech has raised $3.3 billion to help fund its growth.
- The company, which develops drugs to treat cancer, launched its initial public offering on New York’s Nasdaq in 2016 and added a Hong Kong listing a couple of years later. Beigene will be the first company to trade concurrently on the three bourses.
- Its latest float, however, follows a 2020 U.S. law mandating that companies whose audit papers cannot be inspected by U.S. watchdogs for three years will be delisted from U.S. exchanges. China has for years blocked regular access to mainland work papers, considering them to be state secrets.
- Beigene’s current auditor is Chinese.
- If no solution is found, companies who cannot comply risk being delisted from 2024.
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Editing by Antony Currie and Katrina Hamlin
Our Standards: The Thomson Reuters Trust Principles.
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