Global investment banks are racing to redirect initial public offerings by Chinese groups towards Hong Kong after new cyber security rules from Beijing halted lucrative tech listings previously heading for New York.
Around 20 Chinese companies had publicly disclosed plans to raise $1.4bn from share sales in New York later this year, Dealogic data show. But that was before regulators in Beijing launched an investigation into Didi Chuxing, just days after the Chinese ride-hailing group’s $4.4bn New York flotation, sending shares down 20 per cent from its IPO pricing.
The intervention has thrown further US listings into doubt and set off a scramble to redirect deals. Advising Chinese companies on IPOs has been a lucrative business for banks including Goldman Sachs and Morgan Stanley, generating fee revenue of $460m from this work in the first half of the year.
“We’re speaking to everyone about it. All the Chinese issuers planning New York IPOs are looking at whether they can pivot to Hong Kong,” said a senior capital markets banker in Hong Kong.
Strict listing rules in Hong Kong, such as minimum profitability requirements, meant many companies would struggle, he said. “If you want to do a deal this year, at best you’ll be delayed until 2022 and at worst you won’t be able to do it,” he added.
In the first half of the year, 34 Chinese companies raised $12.4bn in New York IPOs, a record high on both counts, helping to prop up US banks’ fee revenues even as US-China tensions worsened. More than $2tn worth of shares already trade in New York.
Hong Kong appears to offer a good alternative, bankers and lawyers say, as Beijing’s control over the financial hub means it will be less affected by the new rules on foreign listings that have hit share sales in New York.
Data security issues, brought to the fore by the Didi Chuxing shock, are at the centre of China’s crackdown. Days after that ill-fated IPO, Beijing’s Cyberspace Administration of China, or CAC, launched a cyber security review into the company.
Top officials in Beijing then called for a new regulatory regime to police overseas IPOs and the CAC proposed rules banning companies with more than 1m users from listing abroad without a security review and official permission.
Two Wall Street bankers in Hong Kong said companies with a large data component to their business were among those most rapidly switching their plans to Hong Kong and swallowing the associated delays and costs. “If you don’t have a data angle they will wait until things calm down and see. The problem is no one wants to be the first,” one banker said.
Chinese tech groups going public have long favoured New York thanks to its deeper, more liquid markets and ease of listing compared with Hong Kong, where companies are vetted by both the city’s securities regulator and the stock exchange. Bankers also enjoy higher fees of 5 to 7 per cent on funds raised through US share sales compared with around 2 per cent in Hong Kong.
Bruce Pang, head of research at investment bank China Renaissance said Chinese listings in New York would suffer until the details of the new regulatory regime were hashed out among perhaps a dozen Chinese regulators — after which it could take months for companies looking to list abroad to gain approval.
Pang added that a growing number of Chinese companies faced an urgent need to go public. “If they can’t wait, Hong Kong will be their only choice,” he said.
The biggest beneficiary of the new rules so far has been Hong Kong Exchanges and Clearing, whose shares have jumped 14 per cent this month.
Hong Kong’s stock exchange appointed its first non-Chinese chief executive this year, Nicolas Aguzin, a former JPMorgan banker who was born in Argentina.
Aguzin will be tasked with maintaining HKEX’s attractiveness to mainland Chinese issuers, which make up more than 80 per cent of its equity, while making it more attractive to foreign issuers, which have largely disappeared since a spate of luxury goods, including Prada and Samsonite, listed a decade ago.
However, one senior executive at HKEX said that while the exchange may benefit in the short term from diverted IPOs “the direction of travel does not look good”.
“At the moment the screws are being turned on issuers, but the next logical step is to turn the screws on investors”, the executive said. “I predict that governments and regulators will make it harder for that capital to flow.”
71% of nursing homes not assessed for quality, safety during COVID
The COVID-19 pandemic has resulted in a vast majority of nursing homes nationwide not being assessed to ensure they meet federal quality and safety requirements, a new HHS study found.
State agencies, acting on behalf of CMS, are mandated to complete on-site inspections at least every 15 months, but CMS suspended those inspections between March and August of 2020 to reduce the risk of surveyor transmission.
Despite states being able to resume surveys toward the end of 2020, the pause resulted in a significant backlog. In an analysis of CMS data, HHS found that 10,913 of 15,295 nursing facilities—71%—had gone at least 16 months without a standard survey as of May 31, 2021.
Backlogs ranged from 22% of nursing homes in New Mexico not being surveyed to 96% in Connecticut.
Another issue is that the federal government prioritized surveys focused on infection control during the pandemic, conducting nearly 40,000 more in 2020 than in the prior two years, according to the American Health Care Association and National Center for Assisted Living.
“We were facing a global emergency where front-line staff needed to focus all their energy on protecting our most vulnerable,” AHCA/NCAL said in a statement.
Although it was understandable earlier on in the pandemic to shift to infection control surveys, Joyce Greenleaf, HHS’ regional inspector general in Boston, said the backlog is now alarming as families cannot be sure if their loved ones are safe in nursing homes or if quality requirements are being upheld.
HHS’ December 2020 report found that states also faced backlogs of nursing home surveys earlier on in the pandemic, with 8% of nursing homes having gone at least 16 months without a standard survey as of June 2020.
Infection control surveys are only required to happen at 20% of nursing homes based on states’ discretion, said Danielle Fletcher, HHS deputy regional inspector general in Boston, and mostly collect data that identifies facility and community risks.
“It’s not a substitute for a comprehensive survey that covers a lot of territory,” Fletcher said. “[Standard surveys are] CMS’ main tool to ensure minimum standards are met.”
The COVID-19 pandemic is continuing to hit this sector hard, with 94% of nursing homes experiencing staff shortages and nearly 75% saying that their workforce situation has worsened in the past year, according to an AHCA/NCAL survey.
The group also found that 66% of nursing home providers expected to potentially close in 2021 due to small profit margins, losses and cost increases in areas such as staffing.
More than 78% of nursing facility residents and 56% of staff are currently vaccinated according to Medicare data, although large disparities in vaccination rates exist between states.
TreySongz has a question for all the R&B lovers out there! BrunoMars
TreySongz has a question for all the R&B lovers out there! BrunoMars
Another wave of students may opt out of college this fall
As the delta variant drives new Covid cases across country, the pandemic’s economic impact continues to weigh heavily on college enrollment.
Now, with another class of undergraduates set to start classes in the fall, families are once again struggling with the cost.
Nearly two-thirds of parents, or 63%, said their child’s post-high school plans have returned to what they were before the global pandemic, according to a report by Discover Student Loans.
But of those who have changed their college plans, most said they will now go to a school closer to home, attend an online university or go to a less-expensive alternative.
Research shows these students are primarily from low-income backgrounds, students of color and first-generation students — also hardest hit by Covid.
Half of the students who are not attending college or enrolling in a career and technical education program would have attended if they had received adequate financial aid, according to another recent report by the Horatio Alger Association.
Four in 10 students need more financial aid than they did before the pandemic, and 1 in 7 students who did not previously require aid need it now, the nonprofit organization found.
Of the students who are pursuing further education and received a scholarship, 70% said it was a deciding factor in their ability to enroll.
“Cost was the No. 1 problem I had, because I knew my family wouldn’t be able to help,” said Mariah Jimenez, 18, a recent high school graduate from Albuquerque, New Mexico.
“All of senior year, I was scared I wouldn’t have enough to pay for college,” she said.
When Jimenez found out she was a recipient of a $25,000 scholarship through Horatio Alger, “I cried,” she said.
In September, Jimenez will begin her freshman year at Southern Utah University and plans to study nursing. “I am extremely excited,” she said.
When Covid brought the economy to a standstill, one-quarter of last year’s high school graduates delayed their college plans, according to a separate survey from Junior Achievement and Citizens, largely because their parents or guardians were less able to provide financial support.
Although about 40% of parents said their ability to help pay has improved since this time last year, 63% remain concerned about having enough money for higher education, Discover also found.
The vast majority of students and their families still say college is well worth it, despite the rising cost. And yet, it is increasingly out of reach.
Tuition and fees plus room and board for a four-year private college averaged $50,770 in the 2020-21 school year; at four-year, in-state public colleges, it was $22,180, according to the College Board, which tracks trends in college pricing and student aid.
When adding in other expenses, the total tab can be more than $70,000 a year for undergraduates at some private colleges or even out-of-state students attending four-year public schools.
“If we want more students from diverse backgrounds to consider furthering their education, we must ensure that they have access to the necessary resources to help pay for it,” said Terrence Giroux, executive director of the Horatio Alger Association.
On Thursday, the U.S. Department of Education said it will provide an additional $3.2 billion in emergency grants to help under-resourced institutions develop programs to engage disconnected students, expand mental health services and improve retention rates.
The current model is unsustainable, according to Lynn Pasquerella, president of the Association of American Colleges and Universities.
“I hope this provides the impetus for reimagining higher education and addresses the racial and economic segregation,” she added. “I don’t think the answer is to deny access to those at the lowest economic rungs.”
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