(Bloomberg) -- Biotechnology firm LianBio fell 14% in its U.S. trading debut, sounding a cautionary note for companies operating primarily in China after a surge of such listings came to a halt in July.
LianBio's shares, which sold for $16 in its $325 million initial public offering, opened trading Monday at $15.50. The shares closed at $13.70 in New York, giving the company a market value of $1.44 billion. Accounting for employee stock options and warrants, the company has a fully diluted value of about $1.6 billion.
The biotech company was founded by New York private equity fund Perceptive Advisors, and the firm and its affiliates now control 50.5% of LianBio, according to its prospectus. LianBio, which lists headquarters in both Princeton, New Jersey, and Shanghai, does business primarily through subsidiaries in China.
U.S. IPOs by Chinese companies have nearly vanished since July, when Beijing announced a cybersecurity probe of Didi Global Inc. just days after its New York listing. The escalation of an apparent crackdown on China's corporates wiped about $1 trillion off the aggregate market value of its listed firms. The U.S. Securities and Exchange Commission has issued detailed queries to companies with links to China, and even Hong Kong-based companies with little to no presence in the mainland have been warning about risks.
Billionaire Richard Li's U.S. IPO of his Asian insurance group, FWD Group Holdings Ltd., stalled as regulators questioned whether the Chinese government could extend its authority to Hong Kong-based firms like FWD, Blooomberg News reported in October. In a revised filing Monday, FWD noted recent statements by the Chinese government and said there was no guarantee its operations wouldn't experience any material adverse impacts.
For More: China Is Said to Weigh Unprecedented Didi Penalty After IPO
Including Didi's $4.4 billion June 30 IPO, 46 companies based in China and Hong Kong raised more than $15 billion in the first half of the year in the U.S., according to data compiled by Bloomberg. Since then, only five such companies had raised $329 million combined before LianBio's IPO, the data show.
LianBio sold 20.3 million American depositary shares after marketing them for $15 to $17, according to a statement Sunday. Each ADS represents one ordinary share.
Limited Similarities
The similarities between LianBio's offering and Chinese companies like Didi are limited. The biotech firm doesn't hold personally identifiable data on patients in China, nor does it have a variable interest entity in its corporate structure, according to the prospectus. VIEs create a foreign shell company outside of China and were widely used by issuers from the country until falling under close scrutiny by Beijing authorities amid stringent new rules on overseas listings.
Still, LianBio said in the first page of its prospectus that there are “significant legal and operational risks associated with having the majority of our operations in China,” including potential changes in the legal, political and economic policies of the Chinese government.
LianBio focuses on in-licensing assets for greater China and other Asian markets, according to its filings. It has a pipeline of nine assets in the areas of cardiovascular, oncology, ophthalmology, inflammatory disease and respiratory indications. The company posted almost $140 million in losses in 2020 and $162 million for the six months ended in June.
The offering was led by Goldman Sachs Group Inc., Jefferies Financial Group Inc. and Bank of America Corp. The shares are trading on the Nasdaq Global Market under the symbol LIAN.
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