Why Chinese Tech Startups Are Ditching The U.S. Stock Exchanges For The New Third Board

Just two years ago, Chinese internet companies were lining up for IPOs in the U.S. market, but their favor has since shifted towards local stock markets for the accessibility and higher valuations supposedly offered on the mainland.

Appetite for U.S. listings started to cool off in the beginning of 2015, since then nearly thirty U.S.-listed tech stocks have initiated privatization plans in seek of a domestic re-listing, among them are big names including Qihoo 360, Momo, Perfect World and Shanda Games. Reports show that not a single Chinese internet or tech company filed for a U.S. listing in the first quarter of this year.

Even for a domestic IPO, Chinese companies seeking to go public have quite a few options to choose from as for which market they want to get listed. Shanghai Stock Exchange (SHSE) and Shenzhen Stock Exchange (SZSE) are two main boards of China’s stock market, but the listing threshold is higher, for example, they require listed companies to recorded sustained profitability, a condition most internet companies can’t meet in their first few years of operation.

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