May 24, 2018 05:38 AM

Baidu, NetEase Join Queue for Issuing CDRs

Chinese regulators have pushed forward the CDR program in hopes of gaining more mainland tech listings. Photo: VCG
Chinese regulators have pushed forward the CDR program in hopes of gaining more mainland tech listings. Photo: VCG

Two more U.S.-listed Chinese tech giants are moving closer to make secondary listings on the Chinese mainland market by issuing China depositary receipts (CDRs), several sources close to the matter told Caixin.

Baidu Inc., the dominant search engine, and game company NetEase Inc. will join Alibaba Group Holding Ltd. and Inc. in seeking domestic listings as early as the end of June, as mainland authorities encourage the country’s tech leaders to list at home, sources said.

China’s regulators are looking to model CDRs after U.S.-listed American depositary receipts (ADRs). The CDRs would enable tech companies to bypass legal and technical barriers to initial public offerings on China’s A-share market, such as restrictions on weighted voting rights — also known as dual-class shares — and mandatory requirements on IPO applicants’ profitability.

Expectations on the launch of CDRs rose since the beginning of the year as regulators signaled efforts to invite more tech listings in a bid to invigorate the domestic capital market. Caixin learned that the CSRC picked eight companies as the first candidates for the CDR program. In addition to Alibaba,, Baidu and NetEase, social media giant Tencent Holdings Ltd., online travel agency International, Weibo Corp. and smartphone lens maker Sunny Optical Technology Co. are on the list.

Baidu picked Huatai Securities as its sponsor for the planned depositary offering while NetEase chose Citic Securities, China’s largest brokerage firm, and Huatai Securities as its sponsors, separate sources told Caixin.

Citic Securities is one of the sponsors for Alibaba’s offering, and Huatai Securities will also work as’s financial adviser, Caixin has learned. The companies and their sponsors are preparing materials for the listings pending regulators’ release of detailed guidelines on CDRs, the sources said.

The China Securities Regulatory Commission published draft rules May 4 on CDRs. The rules are open for public comment until June 3.

The China Securities Depository and Clearing Corp. is also soliciting public comment on clearing rules related to CDRs. The deadline for feedback collection is June 1.

A person close to the CSRC told Caixin in April that the final rules could be ready within one or two months.

Another big name expected to take part in the CDR program is leading smartphone maker Xiaomi Inc. Sources told Caixin that Xiaomi, which filed IPO paperwork in Hong Kong in early May, has agreed to list some of its shares on the mainland through a CDR issuance. But a Xiaomi executive said Xiaomi’s CDR issuance is likely to come later than those of Alibaba and due to its IPO process.

Xiaomi didn’t disclose how much it plans to raise, but it could go public at a value of as much as $100 billion, which would make it the largest since Alibaba’s blockbuster IPO in 2014.

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