Wednesday Tech Briefing: June 6

DEALS AND FUNDRAISING

Meituan Aims for September IPO in Hong Kong

What:

Food delivery and reviews giant Meituan-Dianping is preparing its application for a Hong Kong listing as early as September. Last week, Meituan CEO Wang Xing met with bankers in Hong Kong to discuss the company’s IPO filing plans.

Meituan is seeking a valuation of $60 billion and would use its IPO proceeds to fund its continued expansion of services including ride-hailing, as well as future acquisitions in China and abroad.

Why it’s important:

Meituan hopes it can become the “Amazon for services” in China, and its pitch to investors is that it can turn a profit, with the company’s revenue growing quickly as it expands into more parts of the Chinese economy.

Big picture:

This comes amid a wave of massive IPOs for China’s most valuable tech companies, including Alibaba’s payment and financial services affiliate Ant Financial and smartphone maker Xiaomi. (Source: The Information)

ARM Holdings Sells Majority Stake in China Chip Unit

What:

British chip design company ARM Holding said it will sell a 51% stake in ARM Technology (China) Co. for over $775 million to form a joint venture in China.

Caixin reported last year that ARM was forming a venture with the Hopu-ARM Innovation Fund, backed by investors including China’s Hopu Investment Management Co. Ltd., China Investment Corp., Singapore’s Temasek Holdings and ARM itself.

Why it’s important:

ARM said it estimates that around 95% of all advanced chips designed in China last year were based on ARM technology.

The joint venture will license ARM semiconductor know-how to Chinese companies and help develop its technology in the country locally.

Big picture:

Foreign technology heavyweights, including Microsoft, Cisco and Qualcomm, have all set up Chinese ventures whose majority stakes are controlled by local partners. This allows them access to the market as Beijing races to groom homegrown technology powerhouses. (Source: Caixin)

Sharp, Owned by Foxconn, to Buy Toshiba PC Business

What:

Sharp Corp. said it will buy Toshiba’s personal computer business for $36 million and issue $1.8 billion in new shares to buy back preferred stock from banks.

Sharp will take an 80.1% stake in Toshiba’s PC unit on Oct. 1, and will retain its Dynabook brand.

Why it’s important:

The acquisition highlights the rapid recovery of Sharp under the control of Foxconn, and marks a return by Sharp to the PC market after it quit eight years ago.

Big picture:

Sharp will be able to use the scale of parent Foxconn, the world’s biggest contract manufacturer, to produce PCs more cheaply, just as it has done with TVs. (Source: Reuters)

BIG TECH COMPANIES

Alibaba and Tencent Tell Bankers to Pick Sides

What:

Tech rivals Tencent and Alibaba have demanded that bankers working for them avoid doing so for their competitor.

Ant Financial, the Alibaba payments affiliate currently closing a $10 billion funding round, made a number of banks sign “very restrictive non-compete” agreements preventing them from working for Tencent entities.

Why it’s important:

The requirements have split investment banks into two camps, highlighting the companies’ clout in virtually every sphere of China’s economy as well as their prolific deal-making.

Big picture:

Both companies are dominant players in areas spanning e-commerce, cloud and payments, causing possible conflicts of interest if a third party working for both has access to data and strategy details. (Source: Financial Times)

Ant Financial Shifts Focus From Finance to Tech Services

What:

Ant Financial is shifting its main focus to technology services and away from payments and consumer finance, due to growing regulatory pressure on its core businesses, including payments, microlending, credit rating and wealth management.

The company expects technology services to make up 65% of its revenue in five years, compared with an estimated 34% in 2017.

Why it’s important:

The shift brings Ant Financial in line with the government’s strategy for the financial sector while giving it room to grow and innovate.

Big picture:

Ant Financial is preparing for IPOs on the Chinese mainland and in Hong Kong in 2019 and expects to soon close a $10 billion funding round that would give it a valuation of $150 billion.

The company has amassed a range of financial licenses, worrying regulators who want to make sure that increasingly large private financial firms do not present systemic problems to the Chinese economy if they fail. (Source: Reuters)

POLICY

Mainland Weighs New High-Tech Stock Venue in Battle With Hong Kong

What:

Officials from the China Securities Regulatory Commission and Ministry of Science and Technology are studying a new trading venue in Shanghai that would waive earnings and revenue requirements for biotechnology and high-tech firms, sources told Bloomberg.

The China Securities Regulatory Commission later denied that it had participated in such a plan.

Why it’s important:

Officials are concerned that new rules in Hong Kong that dropped revenue and profit requirements for biotech companies could lure away such businesses.

Big picture:

The talks, if they happened, are the latest example of Chinese authorities looking at ways to boost the domestic market and compete with overseas exchanges. (Source: Bloomberg)

China Tightens Supervision on Ride-hailing Services

What:

China’s Ministry of Transport and six other ministries said they will launch joint supervision of the ride-hailing industry, for both in-progress rides and after-journey services.

Chinese government will have the right to summon ride-hailing drivers and platforms for investigation and correction if unlicensed services, information leaks, tax evasion, unfair competition, illegal transactions or other irregularities occur.

Why it’s important:

The Chinese government has moved to tighten regulation of ride-hailing drivers and platforms, vowing to crack down on illegal activities.

Big picture:

The joint regulation comes after a 21-year-old woman using Didi Chuxing was murdered by her driver last month.

After the murder, DiDi was heavily criticized for its loose verification process for drivers and lack of safety measures for passengers. More than 25 million rides are made each day through Didi's app, which has more than 21 million registered drivers and car owners. (Source: Xinhua)

Compiled by Zhang Erchi and Zhang Yidi