,Hot race: Employees operate machinery at the Daqo New Energy Corp plant in Xinjiang. The New York-listed firm has a US$3.97bil valuation, lower than its China value. ― Bloomberg
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SHANGHAI: When a Chinese solar manufacturer that had been traded in New York for a decade held an initial public offering (IPO) last month on Shanghai’s Star Board, it priced the shares at about a 9.6% premium to their United States counterparts.
A little more than a month later that premium has shot to 492%.
Shanghai-listed Xinjiang Daqo New Energy Co now has a market cap of US$23.5bil (RM98.44bil), compared to a US$3.97bil (RM16.63bil) valuation for New York-listed Daqo New Energy Corp. That’s despite the two firms having almost identical assets, according to Robin Xiao, an analyst at CMB International Securities Corp.
That nearly US$20bil (RM83.78bil) premium goes a long way to explaining why Chinese solar manufacturers that once coveted US listings are now targeting exchanges at home.
US-listed JinkoSolar Holdings Co and Canadian Solar Inc have also recently filed for their domestic units to have IPOs in Shanghai. Daqo, Jinko, and Canadian Solar are keeping their US listing while seeking additional capital in the Chinese market.
“They can raise capital to grow their operations, and get a higher valuation than they did in the US,” said Rene Vanguestaine, managing partner for investor relations consulting firm Christensen China Ltd, who has worked with Jinko and Daqo.
While Daqo in some ways is unique in that its operations are mostly in Xinjiang, a region that has been targeted by US trade officials for alleged labour and human rights abuses, it’s not the only company to achieve a premium in the mainland market.
When Trina Solar Co delisted from the New York Stock Exchange in 2017, it was valued at US$1.07bil (RM4.48bil). It was worth more than US$5bil (RM20.94bil) after its first day of trading in Shanghai last year, and is now valued at more than US$17bil (RM71.21bil).
There are myriad reasons for the higher valuations in China. “A-share investors are more optimistic to the overall future growth of the solar sector,” said Robin Xiao, citing China’s accelerating path to president Xi Jinping’s net-zero targets, and domestic investors’ closer access to the business as Chinese firms dominate global solar manufacturing.
Xiao added that overseas investors were more cautious about the trade disputes between the US and China. ― Bloomberg