LinkDoc Formally Withdraws Its U.S. IPO. Next Stop, Hong Kong?

Medical big data company has filed with U.S. securities regulator to officially terminate its plan to raise $200 million through a New York listing

Key Takeaways:

• LinkDoc has formally withdrawn its plan to raise $200 million from a U.S. IPO, nine months after its 11^th hour halt to the listing
• Three other Chinese companies with pending U.S. listings could revive their plans in the second half of this year as last year’s regulatory turmoil shows signs of receding

By Doug Young

Medical big data firm LinkDoc Technology Ltd. has formally signaled the end of its hopes for a U.S. listing, informing the U.S. securities regulator last week it was withdrawing its IPO application first filed last June. Readers might recall this company had the misfortune of trying to list at the height of a storm centered on the Uber-like DiDi Global (DIDI.US) over data security concerns from China’s cybersecurity regulator.

“In light of the current capital markets condition, the company is considering other alternatives and has determined not to proceed at this time with the offering and sale of the securities proposed to be covered by the registration statement,” LinkDoc said in a brief statement accompanying its withdrawal notice dated April 11.

With the U.S. listing now formally dead, the big questions are: What will LinkDoc do next, and what’s ahead for the handful of other Chinese companies that had filed for U.S. IPOs around the same time and have gone silent since then? At least one such plan appears to still be moving forward, which we’ll describe shortly.

A potential alternative for LinkDoc and the others could be Hong Kong listings, and it’s quite possible the formal withdrawal of its U.S. IPO application means LinkDoc has begun the early confidential steps for a Hong Kong IPO that could soon lead to its first public filing. But Hong Kong has its own obstacles, most notably tough profitability requirements that would normally disqualify a money-losing company like LinkDoc.

But the Hong Kong Stock Exchange has shown growing flexibility in the last few years to accommodate this kind of high-tech, high-growth company. Accordingly, it is increasingly making exceptions and allowing such companies to list, in its own bid to diversify beyond the types of real estate and manufacturing companies that were its traditional bread and butter.

All that said, let’s return first to LinkDoc, including a review of the bumpy road that brings us to the present, before looking at some of the other listings also in limbo. LinkDoc was one of a steady stream of money-losing but fast-growing tech companies to file for U.S. listings, seeking to raise around $200 million through its IPO. But it abruptly scrapped the plan at the 11^th hour as China’s cybersecurity regulator was targeting a growing number of companies for data security reviews.

Founded in 2014 and backed by e-commerce giant Alibaba’s healthcare arm, Alibaba Health Information Technology (0241.HK), LinkDoc garners and processes large volumes of medical data for conducting research on new drugs and patient care, with a special focus on cancer treatments. Its main platform, called LinkCare, integrates online and offline channels to assist patients, especially those suffering from cancer, to better manage their illnesses in and out of hospital.

The abrupt halt to its IPO created questions about the company’s future, since it had previously said that even with the $200 million from the listing it would still only have enough cash to fund its operations for the next 12 months.

No reports of new private funding have emerged since then, though a Hong Kong media report last September cited unnamed sources saying the company was seeking to raise $300 million from private sources and was also studying a potential Hong Kong IPO. Our bets are that the formal withdrawal of the U.S. listing plan signals the company will soon file for such a Hong Kong IPO, probably within the next month.

U.S. IPO train to resume?

LinkDoc’s decision to abandon the U.S. probably owes to two major factors: its urgent need of cash and also its realization that it might need to get a data security review before making such a listing. That means it’s a relatively unusual case, and not necessarily indicative that other Chinese companies whose U.S. IPO plans have gone silent will now formally abandon those plans.

LinkDoc isn’t the only company to formally withdraw its U.S. IPO prospectus. Other high-profile names that took similar action last year included online socializing app Soulgate, and shared bike operator Hello Inc. We haven’t heard anything form Soulgate since it scrapped its listing plan, though media have reported that Hello raised $280 million from private sources last November.

Another company to formally withdraw its offering was high-tech education services company Spark Education. But that decision was more likely prompted by China’s separate crackdown on the private education sector that specifically targeted companies offering K-12 services.

Meantime, two companies – drug developer LianBio (LIAN.US) and disposable medical device seller Meihua International (MHUA.US) defied the odds and managed to make U.S. IPOs despite all the challenges. LianBio hasn’t done so well, with its shares down by more than 60% from its October listing price. But Meihua has held up better, and its shares are down by a more modest 8% in the two months since their February trading debut.

That leaves at least four companies that filed IPO prospectuses last year but have yet to formally withdraw their listing plans: hotel operator Atour; adult education services provider Jianzhi; cloud-based interior design company Manycore; and Daojia, a provider of maids and nannies.

Of those four, Jianzhi seems the most determined to proceed with its listing. The company, whose adult education focus is outside last year’s regulatory crackdown, has filed regular updates since its original filing last July, including its latest update on March 28. Atour hasn’t filed anything new since last November, while Daojia and Manycore haven’t filed anything since early July.

The steady series of filings by Jianzhi seem to indicate it could make its IPO soon, possibly in the next two to three months. The other three could follow in the second half of the year. Such a revival of those U.S. listings could signal a bigger reopening of the China-U.S. pipeline in the second half of this year, as many of the signals that slammed the brakes on new listings last year show growing signs of receding.

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