Wall Street's IPO fee machine under threat after regulatory scrutiny

China’s regulatory crackdown threatens to reverse a surge in underwriting fees for US investment banks like Goldman Sachs Group Inc., Bank of America Corp. and Morgan Stanley.

Companies based in China have been the most prolific foreign issuers of equity in New York during the pandemic. But the budding $50 billion flow of US initial public offerings and secondary stock sales is at risk after new regulatory scrutiny surrounding cybersecurity firms.

“China’s increased oversight of overseas listings by Chinese companies, announced by the State Council on July 6, could halt unicorn listings in 2H in Hong Kong and the U.S,” Bloomberg Intelligence analyst Sharnie Wong wrote in a note. “Their combined share of Chinese IPOs may drop to less than 40 per cent of deal value in 2H from 55 per cent in 1H, assuming deal value halves sequentially.”

Investment banks have raised $49.2 billion in US stock offerings over the past year for companies based in China and their largest holders, a 452 per cent increase from the previous 12 months. That includes more than $23 billion in IPOs and another $26 billion through secondary offerings.

The heavier deal flow has provided an uptick in fees to the banks. 

Chinese bike-sharing start-up scraps plans for IPO in US

Chinese bike-sharing giant Hello has formally scrapped plans for a US initial public offering, becoming one of the first big casualties of Beijing’s crackdown on overseas listings. The company requested a withdrawal of its registration for a US share sale, saying it no longer wanted to conduct the offering at this time, according to a filing.