5 shelved Chinese IPOs cast doubt on the 17 still in U.S.’s 2021 pipeline

Medical data platform LinkDoc Technology shelved its IPO plans on Thursday, becoming the first company to axe its debut after China announced stricter supervision on overseas listings, Bloomberg reports. LinkDoc was expected to raise up to $211 million on the Nasdaq. It was the second-largest Chinese IPO in the U.S. pipeline among firms that had already filed to list, according to Refinitiv data.

The Beijing-based company pulled the listing because of Beijing’s regulatory crackdown, says Reuters.

LinkDoc’s delay was the first sign that Beijing’s clampdown on Chinese companies’ overseas listings is stalling the parade of firms readying IPOs in the U.S.

Last week, the Cyberspace Administration of China (CAC) announced an investigation into Didi over data and national security concerns, two days after the ride-hailing giant raised $4.4 billion in an IPO on the New York Stock Exchange (NYSE). The CAC announced on Monday two more probes, into Full Truck Alliance, known as China’s “Uber for trucks,” and job recruitment platform Boss Zhipin, citing similar issues. The two companies went public in the U.S. last month.

Then on Tuesday, China’s State Council announced stricter data supervision, particularly pertaining to “cross-border data flow…and the information security of overseas-listed companies,” a sweeping statement that indicated Beijing’s intention to more tightly regulate Chinese companies seeking to raise capital on foreign exchanges.

Beijing’s recent moves “pose big risks for Chinese listing candidates in the U.S. that may face similar questions over the way they store data,” said a July 5 Gavekal Research note. The Chinese state is ensuring that tech companies’ data, and those who control it, “remain well within China’s sphere of influence,” wrote Michael O’Rourke, chief market strategist at JonesTrading on Wednesday.

Four other Chinese firms halted their U.S. IPOs around the time of Beijing’s action against Didi or just before it, bolstering the case that the new regulatory campaign will slow down or halt Chinese listings on American exchanges and casting doubt on the 17 other Chinese IPOs that are planned for the U.S. this year.

All five companies that have delayed their IPOs operate high-tech app platforms that accumulate, store, and deploy important consumer data, from health to lifestyle to location information—exactly the kind of troves Beijing wants to protect. The value of the five shelved IPOs exceeds $1.4 billion, according to Refinitiv data. None of the five companies replied to Fortune’s request for comment.

Podcast and radio platform Ximalaya dropped its NYSE listing plans in recent weeks after discussions with regulators yielded an understanding that “a Hong Kong listing would be regarded as a preferred outcome,” a source told the Financial Times. The Shanghai company was set to list in New York as early as May but was pressured by regulators, including the CAC, to debut in the Asian financial hub instead, according to Reuters. Ximalaya hasn’t filed to list in Hong Kong.

China’s most popular fitness app, Keep, which operates under parent group Beijing Calories Technology, was eyeing a $500 million NYSE listing, but didn’t follow through on the debut that was supposed to take place this week, the FT reports. Bike-sharing app Hello and dating platform Soulgate both scrapped their Nasdaq listing plans in late June; the companies were aiming to raise $100 million and $198 million, respectively. Soulgate cited “alternative financing options” as the reason for yanking its IPO.

The string of shelved listings may indicate that companies are putting off IPOs until they better understand Beijing’s new regulatory scheme, including the State Council’s Tuesday directive on “illegal securities activities,” which the body has yet to clarify. “The companies [that have halted IPO plans] are likely buying time to ensure that they’ve done enough due diligence that is required in this new Data Security Law era,” says Michael Pang, managing director at consulting firm Protiviti.

Another concern is investor sentiment, given how badly Beijing’s surprise actions have hurt Didi’s stock. The company is now trading at $11.21 per share, 21% below its offer price. As of Thursday, Didi had lost roughly $14 billion in value since it listed.

“Companies now feel vulnerable and exposed to different risks, including potentially damaging investor interests,” says Bruce Pang, head of macro and strategy research at China Renaissance Securities.

“They need to be assured that what happened to Didi won’t happen to them,” said Protiviti’s Pang.

Even with the five delays, 17 Chinese firms that filed to list in the U.S. this year remain in the pipeline, according to Refinitiv. Those companies will need to secure “blessing and approval from key Internet regulators before moving forward,” Chucheng Feng, partner at Beijing-based consultancy Plenum.ai, told Fortune on Wednesday.

Five of these 17 firms are expected to rake in IPO proceeds of $100 million or more, according to Refinitiv data. Atour Lifestyle Holdings is the top company in terms of expected proceeds; the group operates a network of 608 mid- to upper-range hotels in 131 cities across China.

Experts say China’s regulatory campaign could still escalate. A data security law that the National People’s Congress passed in June will take effect in September, and the Congress is fine-tuning a law to protect personal information that’s expected to pass soon.

“The government is taking the supervision of [cybersecurity] to a higher level,” says Ian Yinan Wang, partner at DeHeng Law.

Fundamentally, says Morningstar senior equity analyst Chelsey Tam, China’s recent actions “[send] a clear signal that the regulatory risks of Chinese Internet companies are not over.”