Pony AI's IPO debut could set the stage for more Chinese listings as thaw eases

MW Pony AI's IPO debut could set the stage for more Chinese listings as thaw eases

By Steve Gelsi

Chinese companies had been avoiding U.S. listings due to geopolitical tensions, but now they have fresh reason to consider U.S. markets again

Autonomous driving company Pony AI has raised $260 million in its Wednesday stock-market debut that will be the biggest in months for a Chinese company.

The deal sets the stage for more Chinese technology companies to test U.S. public markets again following years of more muted initial-public-offering activity that reflected tensions between the U.S. and China.

In a sign of healthy interest in the deal, Pony AI on Wednesday priced 20 million shares at the top of its estimated price range of $11 to $13 a share for trading on the Nasdaq under the ticker symbol "PONY."

With dollar proceeds of $260 million by offering 20 million shares at $13 a share, PonyAI's U.S.-market debut will be the second-largest IPO from China this year after $441 million raised in May by electric-car and battery maker Zeekr $(ZK)$, according to IPOscoop.com.

WeRide $(WRD)$, another China-based autonomous driving company, raised $110 million in its IPO last month as the third-largest Chinese IPO by dollar proceeds this year. WeRide's IPO priced at $15.50 a share on Oct. 28, and shares closed at $17.60 a share on Tuesday.

At the time of its IPO last month, WeRide said it was the first publicly-listed universal autonomous driving technology company and the first publicly listed Robotaxi company.

At least one other larger Chinese company is planning to list in the U.S. in coming months. Electric truck maker Windrose Technology Inc. plans to raise $200-plus million in an IPO in 2025, according to a reports.

Pony AI boosted the size of its offering of American depositary shares $(ADS.AU)$ by 5 million shares to 20 million shares last week, with Goldman Sachs (Asia) L.L.C., BofA Securities, Deutsche Bank, Huatai Securities and Tiger Brokers underwriting the deal.

From 2022 to 2023 there were only 12 Chinese IPOs with American depositary receipts, but mainly not from technology companies, Jay Ritter, a finance professor at University of Florida who specializes in IPOs, told MarketWatch.

"The Chinese government has discouraged tech companies from listing in the U.S.," Ritter said. "Also, the Chinese government has been encouraging tech companies to 'share the wealth' rather than focus on profit maximization."

That's been slowly changing. Marcia Ellis, global co-chair of private equity practice at Morrison Foerster in Hong Kong, told CNBC that many of the regulatory issues that kept Chinese companies out of the U.S. stock market in recent years have been addressed.

"Chinese companies are becoming increasingly interested in getting listed in Hong Kong or New York, due to difficulty in getting listed in mainland China and pressure from shareholders to quickly achieve an exit," Ellis said.

University of Florida's Ritter said Chinese companies such as Alibaba $(BABA)$, which went public in the U.S. in 2024, made the move because the Chinese government would not approve an offer price with a price/earnings ratio of more than 23 for trading in China.

"Alibaba was able to raise billions of dollars more than they could have raised by selling the same number of shares in China," Ritter said.

The Chinese government no longer enforces this ratio, so successful, growing Chinese tech companies didn't have the same incentive to list in the U.S., he said.

But now, Chinese tech companies are once again taking aim at the U.S. stock market despite chillier relations between the two countries, market players have said.

For its part, Pony AI is raising a total of about $413 million in its IPO including the shares being sold on the Nasdaq, plus a $153.4 million private sale of stock to JSC International Investment Fund SPC, Guangzhou Nansha Chicheng Future Industry Investment Fund Partnership, Guangqipony Holdings Limited, and Kechuangzhihang Holdings Limited.

At last check, Pony AI software and sensors were used on a fleet of more than 250 robotaxis and 190 robotrucks.

Its track record includes more than 3.9 million kilometers of driverless distance - or about 2.4 million miles.

"We were among the first in China to obtain licenses to operate fully driverless robotaxis" in Beijing, Shanghai, Guangzhou and Shenzhen, the company said in its IPO prospectus.

"We are the only autonomous driving technology company that has obtained all regulatory permits" in those cities, the company said.

Last week, Bloomberg reported that Uber Technologies Inc. $(UBER)$ was in advanced talks to invest in Pony AI and potentially use its self-driving technology outside the U.S.

-Steve Gelsi

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November 27, 2024 09:06 ET (14:06 GMT)

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