Guangzhou-based drone maker Ehang filed on Thursday an application for an initial public offering (IPO) in the US, using a placeholder amount of $100 million, following reports in late September about a confidential submission.
Why it matters: The first to receive a license to test unmanned aerial passenger vehicles, Ehang is one of several Chinese tech companies that have recently filed to float shares on US exchanges despite China’s efforts to keep homegrown tech companies from listing abroad with the debut of its new Nasdaq-style tech board.
Details: Morgan Stanley and Credit Suisse are working together on the listing.
- The company cites US “security-related concerns” toward Chinese companies and products as a risk factor in its form F-1.
- Citing the blacklisting of telecom equipment manufacturers Huawei and ZTE, it says that potential export restrictions from the US would strain its supply chain by limiting its access to key components and technologies.
- US restrictions also feature in a section about the risk of an import ban, since US authorities have repeatedly warned against the use of Chinese drones for commercial purposes and have blacklisted other Chinese hardware manufacturers.
“We cannot assure you that our AAVs will not be placed on such trade blacklist in the future.”
—Ehang in its filing to the Securities and Exchange Commission
Context: Beijing introduced its Nasdaq-style tech board on the Shanghai stock exchange to keep Chinese companies from taking their IPOs to other countries.
- The so-called STAR market opened for trading on July 22, six months after financial authorities announced relaxed regulations.
- However, many major Chinese startups have chosen to go public in the US. Just in the past week, house-sharing platform Danke Apartments, WeWork’s biggest competitor Ucommune, crypto mining equipment manufacturer Canaan, and interactive podcast platform Lizhi chose to list in the US.
- In August, handset maker Transsion’s listing was delayed, sounding alarms that the STAR market’s more lenient listing requirements weren’t so relaxed after all.
- At the same time, as some analysts forecasted, some companies are hurrying to the Shanghai stock exchange. There are reports that Chinese semiconductor manufacturers are accelerating to complete their listings on the STAR market before the end of the year. Chinese robotics maker UBTech is also reportedly eyeing a Shanghai listing.
- Ehang was founded in 2014 in Guangzhou and initially specialized in drones with commercial applications like agriculture. It pivoted to passenger-carrying drones in 2016, when it revealed a $300,000 drone concept.
- Ehang is the first company to be licensed by the Civil Aviation Administration of China to test drones carrying passengers and has been carrying out tests in Guangzhou.
- Chinese drones are facing fierce criticism from US authorities, who introduced in September a bill barring federal agencies from buying drones with China-made equipment.
- The US Department of Interior on Wednesday grounded its entire drone fleet because of security fears related to Chinese parts or manufacture.