Not all companies are cool enough to join a startup board – nor should they be. Geely Automobile, which turns 24 this month, has dropped plans to supplement its Hong Kong listing by raising up to $3 billion on Shanghai’s technology-focused STAR Market, citing “strategic adjustments.” Other established giants seeking a listing such as Syngenta should take note.
The STAR Market was launched in 2019 to help early-stage tech-focused firms raise funds. China’s first Nasdaq-like registration-based system was meant to remove the heavy-handed regulatory oversight that had created queues of several hundred companies waiting for approval to float on main boards in Shanghai and Shenzhen. Such was its success that the profitable members on the benchmark STAR 50 index trade at a median around 59 times expected net profit, Refinitiv data shows.
This has attracted well-established companies touting their innovation credentials. So despite promises to implement a “registration-based” system, regulators this year began filtering applicants, per media reports. This may have screened out Geely, which already has a $33 billion market capitalisation in Hong Kong. The company does build electric vehicles, and its parent company has invested in flying air taxis as well as gone into the satellite business, but the listed entity is mostly a conventional carmaker.
This could bode ill for agricultural giant Syngenta, bought by state-owned ChemChina in 2017, which has innovative business lines in seed science and the like but is no startup. On June 21 it said it wanted to list on STAR. No fundraising size was given, although its likely market capitalisation would be about $50 billion, Reuters reported citing sources. Assuming Syngenta raised something like the $3 billion Geely had targeted, listings from the two giants would have soaked up funds equivalent to 70% of the $8.5 billion raised on STAR so far this year, per Refinitiv data. That would risk stifling the startup finance STAR is designed to provide.
Tightening the requirements for STAR candidates could help cool an overheated board and deter thematic dilution. Syngenta’s state-owned parent and its expertise in one of China’s strategic priorities could win it approval. As for Geely, it is hardly out of options with founder Li Shufu an adept user of capital markets. Both it and Syngenta might end up in Shanghai yet.