The turbulent market for small public goods in the U.S. is "thriving" as China lists surge on New York nasdaq.
At the end of last year, the growth in listings began with 42 small products in the second half of last year, followed by 41, the busiest quarters on the record, according to Equity Capital Markets Group Markets Capital Markets Gateway (CMG). This is the 20 in the second quarter of 2024 and 29 in the third quarter.
53 of the listings in the past two quarters came from China and Hong Kong, and only 18 were from the United States, except for nine in Nasdaq. CMG's data does not include special purpose procurement tools that raise funds to take over private businesses.
"The micro-highway IPO market is booming," said Matthew Kennedy, senior strategist at Renaissance Capital. "It's a highly speculative field," he said. "Many investors lose money because most stocks end up well below their initial quote price.
The IPO comes into effect on April 11 ahead of a series of policy changes formulated by NASDAQ, which includes requiring companies to go public under certain standards to raise at least $15 million. The SEC said the new Nasdaq rules would “promote fair, orderly markets” and “protect investors and the public interest.”
Daniel McClory, head of equity capital markets and China at U.S. underwriter Boustead Securities, said he is "currently conducting 30 IPOs, and more than a third are companies in Southeast Asia and larger China."
Meanwhile, the market for large listings is disappointing with Donald Trump’s hope of reviving under Donald Trump. The wave of market volatility around the president’s tariff announcement has caused bankers to delay several highly anticipated technology IPOs, while other large lists have received cool receptions.
That hasn't stopped a deal that's under $50 million since tariffs swayed the market in April. Even though Nasdaq raised the bar last month, the small IPO continued - eight more deals have been left since the rule changes.
Kennedy said the “explosive returns” from companies such as Diginex, ESG Data Group and crowdsourcing platform China Group EPWK Holdings, “can attract the interest of traders who want fast returns.”
Diginex's share price has climbed 1,375% since its listing in January. Last Tuesday, it said that UAE Royal Sheikh Mohammed bin Sultan bin Hamdan Al Nahyan reached a $300 million deal, giving him the right to buy 675,000 shares by the end of the year.
EPWK grew 470% in the months since the market debuted in February, but fell 75% last Monday.
The market for these small products is dominated by amateur traders who usually prefer bargains in the stock market when large currency managers stay away.
U.S. financial industry regulators warned investors in 2023 that “most involve issuers outside the United States after or shortly after the IPO of some small issuers” and “IPOs raise less than $25 million in IPOs.”
The average value of funds raised by CMG in the small IPO tracked in the six months in March is about $9 million.
Brokers say there may be more small IPOs if market conditions improve. “If the market settles and cooperates, we can do a weekly IPO,” McLori said. “That’s it, our monthly goal.”
The two most prolific underwriters in the field - Dominari Securities and RF Lafferty - each will open seven companies this year, including Chinese "machine vision" company Lianhe Sowell and Hong Kong Hotpot Hotpot Chain Masterbeef.
RF Lafferty is headquartered in the Trump Building in the Financial District of New York. Dominari Securities is the chief underwriter of Diginex IPO and a subsidiary of Dominari Holdings, a fintech group four miles north of Trump Tower.
The Financial Times reported last month that Dominari Holdings' shares rose 580% in the six weeks after filing the documents on February 11, which indicated that the president's sons Donald Trump Jr and Eric Trump joined the advisory board.
Dominari and RF Lafferty did not respond to requests for comment.
Some investors are shocked by the concerns of some investors as some investors are as to whether Trump will stand out in the trade tensions with Beijing and Beijing.
A banker at a small U.S. broker said some Chinese companies that have recently listed in the U.S. have “reversed the company’s structure” to hide where they are doing most of their business. He said Chinese companies with overseas subsidiaries are converting their operating companies into parent companies “to disinfect the Chinese nature of listing.”
McClary said he hopes any Trump ban will target large state-owned enterprises and sensitive industries, not small companies. He refuted concerns about Chinese public offerings that the U.S. is taking investments in the U.S. that would otherwise benefit U.S. entrepreneurs.
"In fact, all of these Asian IPOs are full of investors from Chinese investors from Big China or outside China," he said. "It's not that they come to the United States to make money from American widows and orphans."