Chinese AI firm iFlyTek’s healthcare unit plans Hong Kong IPO, sparking hopes that spin-offs fuel a turnaround in slumping listings market

Chinese artificial intelligence (AI) company iFlyTek said it plans to spin off its healthcare services subsidiary, iFlyHealth, with a listing in Hong Kong.

Shenzhen-listed iFlyTek said the initial size of an iFlyHealth listing will not be more than 20.0899 million shares, with an overallotment option of up to 15 per cent. The total number of shares is proposed to not exceed 23.1034 million.

The move will allow iFlyHealth to obtain financing through the capital markets in Hong Kong, which will help it to maintain its leading role in the field of medical AI and increase its international influence, iFlyTek said in a statement late on Tuesday.

iFlyTek, which currently holds a 52.47 per cent stake in iFlyHealth, will maintain control after its spin-off and listing. iFlyTek’s shares declined by as much as 3.4 per cent to 38.78 yuan (US$5.4) on Wednesday.

The potential initial public offering (IPO) could provide a boost to Hong Kong, which has seen a slump in listings. The city raised only a two-decade low of HK$46.3 billion (US$5.92 billion) from local and global investors last year.

It is hoped that growing opportunities for spin-off listings by Chinese firms and positive sentiment among investors in AI-related sectors will help the city’s stock market get out of the woods. KPMG, for instance, forecast on Tuesday that new stock offerings in Hong Kong could double to HK$100 billion this year.

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“As we expect to see a recovery in the Hong Kong IPO market, one area which would contribute to the recovery is the spin-offs of businesses from existing listed groups that have multiple business segments, and Chinese companies that have strong international operations,” said Irene Chu, head of new economy and life sciences in Hong Kong at KPMG China.

“Spin-offs are one of the strategies companies are using to realise better market value, as well as for risk management under the current geopolitical environment.”

Spin-off listing opportunities could include much-anticipated deals such as that of Cainiao Smart Logistics Network, a spun-off unit of Alibaba Group Holding, and JD.com’s property and industrial units. Alibaba owns the South China Morning Post.

Sichuan Kelun-Biotech Biopharmaceutical, which was spun off from Shenzhen-listed Kelun Pharmaceutical, listed on the main board of the Hong Kong stock exchange in July last year. It raised HK$1.26 billion through the IPO after pricing its shares at HK$60.60 each, the lower end of its targeted range.

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Founded in 2016, iFlyHealth utilises speech recognition, speech synthesis and natural language understanding technologies in the medical field. Its products and services include AI-assisted diagnoses, speech-based electronic medical records, medical image recognition and clinical decision support systems, according to its website.

It reported net losses of 215.59 million yuan and 83.56 million yuan in 2022 and 2021, respectively.

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