Chinese firms must learn to build on fundamentals, not propaganda

May 8, 2020. A Chinese tech company successfully listed on Nasdaq. The company raised not only over $500, but also eyebrows.

Kingsoft Cloud (Nasdaq: KC) is the first high profile and large size IPO from China this year in what the analysts described a “test of Chinese stocks among US investors” in “the IPO market’s slowest spring since financial crisis.”

Looking back at the 175 days from Kingsoft was spun off from its Hong Kong listed parent to the Nasdaq listing, it was like “against all odds”: China US trade wars, Covid-19 pandemic outbreak, Dow Jones Index meltdown and S&P50 VIX still as high as 40, lockdown in New York, and renewed trade war. And most prominently, Luckin Coffee scandal.

Without any intentional, promotional campaign and perhaps mainly depending on the effective functioning of its core cloud-based business amid the pandemic-hit social life and economy and a bullish cloud tech market, the IPO was seen very positively by the industry from the beginning.

A commentary from Global investment research network Smartkarma stated that “Kingsoft Cloud's fundamentals ticks all the right boxes and subject to valuation may be the IPO to rebuild sentiment towards Chinese ADR IPOs.”

Smartkarma said its initial thoughts on Kingsoft Cloud are “broadly positive.” The company “has proven that this business model works,” in the case of key clientele. “We believe KC would be an attractive opportunity for US investors to get direct exposure to the rapidly growing Chinese cloud market.”

Wall Street financial news outlet Capital Watch said that After the slew of fraud surfacing at seemingly safe-haven companies including Luckin Coffee Inc. (Nasdaq: LK) and Jay Clayton's warning, KC may exhibit the kind of transparency and verified financials the U.S. investor, and not the short-seller, has been hoping for.

Interestingly, during the whole pre-IPO process, the company had been very welcomed and widely covered by the mainstream global media. It got noticed since its public filing and a good amount of coverage on almost all mainstream financial and investment outlets ranging from the Financial Times, Bloomberg, Reuters, to Capital Watch, Seeking Alpha, WSJ, CNBC, CNN and many more. A Reuters columnist called it “a breath of fresh air for US China listings.”

Kingsoft Cloud’s Chairman Lei Jun called the Nasdaq listing the “beginning of a new race” that reflects his values of “aiming high but down to earth.”

The initial success of Kingsoft Cloud amid the extremely challenging market conditions has Chinese companies, like their peers in other sectors, can only succeed in the global market by building on solid fundamentals and credibility and learn to forget about the habitual way of doing the “positive image” public relations, which is seen as sheer propaganda and serves as no good but harm.