Lichen China Limited’s $16 million Initial Public Offering on Nasdaq
Ortoli Rosenstadt LLP acted as the listing agent for Lichen China Limited, a company that listed at the Nasdaq Stock Market with a $16 million valuation.
Lichen China Limited, a specialist taxation and financial services provider in China, has been around since 1997. The company has announced that it has closed its initial public offer (IPO) for 4,000,000 ordinary Class A shares, priced at $4 per share. The trading of these Class-A ordinary shares began on the Nasdaq capital market on 6 February, 2023. They will be traded under the ticker “LICN”.
Ortoli Rosenstadt LLP acted for Lichen China Limited, with a team that included Jason Ye (Partner & Co-Chair Asia Practice), Yarona Yieh (Counsel), Grace Bai and Crystal Hsu.
An Interview with Jason Ye, Ortoil Rosenstadt LLP
Please give us some background information on Lichen China Limited, its IPO plans and the company’s history.
Lichen China Limited is one of China’s leading providers of financial and taxation services through its subsidiaries. Since 1998, they have been a specialist in financial and taxation solutions in China. They provide (i) tax and financial solution services (ii), education support services (iii), and software and maintenance service (iii). The company offers software products to enterprises, colleges, universities and educational institutions. They leverage their relationships with local educational institutions and their expertise in financial and taxation solutions services.
Lichen’s IPO in 2023 was notable in that it was the very first small-cap IPO from a China-based company to be listed on Nasdaq. In 2023 there was a certain amount of uncertainty due to the current market conditions and geopolitical climate between China and US. Lichen was closely watched by everyone in the industry to determine if it would be accepted as a Chinese Issuer by regulators and if it would close successfully in a soft market.
Univest Securities was the underwriter who helped the company get to the finish line. The Nasdaq listed the company on 6th February 2023 during the Chinese New Year period. The deal gave the market confidence because it showed that the US stock exchange is still open to China-based companies and they can raise money to expand their businesses even though equity markets have been slow.
What role did you and your team play in the IPO?
Lichen hired our firm as their US counsel to represent them for their IPO on the Nasdaq Stock Market, and I was their lead lawyer for their IPO. We worked closely together with the company to cover all aspects of its US IPO. This included their prospectus, their application to Nasdaq, and their responses to the questions asked by regulators.
We also played a crucial role in designing a deal structure which would be beneficial to both the company, and more importantly, regulators. It was especially true towards the end, when the market conditions had significantly changed since Lichen launched its IPO. As the company’s lawyer, we had to use every trick up our sleeves to find legal solutions that would allow them to pass through regulators as quickly as possible with the least amount of changes to the documents.
Lichen’s IPO is significant because it was the first IPO of a small-cap issuer based in China to be listed on Nasdaq by 2023.
Our team also knew that the market could change within hours, and the longer it took to complete the IPO, the greater the risk was for our client. Our team, knowing that timing was crucial, worked with regulators, the underwriter, and our client Lichen on a 24/7 basis. Multiple versions were prepared simultaneously to ensure we had all the legal documents available for everyone at the time they needed them.
We were relieved and happy to see Lichen’s IPO finally complete and its trading begin on Nasdaq. At the same, I’m extremely grateful and proud of our team members who were involved in this listing. Without their commitment and dedication, this listing would not have been a possibility.
What skills and expertise does your team have that is unique?
We consider ourselves first and foremost business lawyers. This means that we look at laws and regulations from the point of view of the business owner. Before becoming a lawyer, I was a businessman. I know that lawyers’ main role is to help the business owner make the right decisions. We do not want to add more legal problems to our client’s lives, but instead provide a practical solution for their everyday problems.
We consider ourselves to be experts when it comes to dealing with Asian companies. I, along with the majority of my staff, have spent significant time in Asia. We are also well versed in the art of bridging the gap between Eastern and Western values. It is especially important when working with regulators. My clients are mostly based in Asia, and many of them have never visited the US. We are their sole voice in front of regulators and investors. We are able to bridge as many gaps or differences in opinion as we can, because we understand both sides.
We take pride in being able to anticipate any issue before it becomes a problem. Preparation is key to success. We are very good at dealing with the problems that we face, but we plan many steps ahead of time before we make a move. We have streamlined the process by implementing a standard protocol based on our past experience dealing with many different issuers. We also think about the unexpected to ensure that the process is not a surprise. Preventive medicine is the best form of medical care, as doctors say. We share the same philosophy.
We are business lawyers. We always approach the law and regulations from the point of view of a business.
What are your main concerns when you advise on an offer?
The IPO process is a long and uncertain journey. We try to anticipate as many issues as we can, but it’s almost impossible to do so. Market conditions can change in an instant. In response, the regulatory response could also change. This is, in our opinion, the risk we must deal with when a company goes public. These changes can potentially delay the process or even compromise the outcome. I advise all my clients to act as quickly as possible if there is a chance of closing a deal. The longer you wait, the greater the chance of failure.
We need to be aware of local regulations, as well as the market risks. This is because we have many clients from overseas. I am a US lawyer, but even though our clients are located overseas, I try to educate myself about the local regulations. Then I either give the information to my staff or ask them for further research on local laws. It is sometimes the unknown that causes most concern. You do not want your foot to be on a regulatory landmine. We have to be able to navigate two or more laws simultaneously, and we must find a balance where our clients are compliant in both the US and local jurisdictions.
Did you face any obstacles during the IPO process? How did your team deal with any challenges that you faced?
Nothing is easy, as I say every day. In today’s society, nothing can be taken as a given, especially when everything has to be done in a collaborative way. Each person is a piece of the puzzle, but they are all interconnected. Often, however, things do not turn out the way that you envisioned them when you start. There is no such thing in our world as an “easy deal”. Each one has its own hair. It’s just a matter of finding a way out.
Lichen’s IPO journey began in 2021 when the market was at its zenith, with a lot of money up for grabs. In 2022, the market changed dramatically and regulators became more cautious in approving companies for listing. We faced many challenges along the way due to market and policy changes. It was necessary to continually rethink our solutions and find the right ones for the moment. The company’s management showed perseverance despite the many changes by focusing on the end goal – the final listing. As their legal counsel we are extremely appreciative of the company’s determination, because in other situations, people have bailed out.
The market was at the peak of its wealth when Lichen launched its IPO in 2021.
What was your experience with Lichen China Limited in relation to your company?
My practice is primarily focused on helping Asian companies get listed on US stock exchanges. Lichen China is based in the Fujian Province of China. They have a management team that has little knowledge of the US capital markets and speaks little English. Yet they have their version of the American Dream. We were asked to represent the company during its IPO process. Our team prepared the Nasdaq application, drafted the prospectus and helped the company respond to regulator comments.
Lichen China’s representation is at the core of our firm. We are a New York-based law firm with international ambition and vision.
How did Ortoli work with the other firms involved in IPO to achieve a successful outcome?
We would be the ‘quarterbacks’ for the entire listing process as the issuer’s attorney on an IPO. We would have to coordinate and control all documents with the company, the underwriter, its counsel, the auditor, and others. The familiarity with the teams of the underwriter and its counsel, auditors, and us made the process much easier. The company trusted us to deal with professional parties, rather than micromanaging the process.
It was useful to know the style of work of each professional in advance, as it helped us prepare for the entire process. By knowing what the other party wanted, we were able to reduce the time required for communication. We would create documents with the nuances of the other party in mind to avoid an endless back and forth on documents. In the nine years I have been practicing law, there has not been a ‘friendly’ deal. It was always a sticking point for one party. Lichen’s IPO wasn’t any different. We respected other parties’ requests while representing the client’s interest zealously. We were happy that the collaborative effort with others resulted in a successful outcome for all parties.
What is your expectation of the impact that the stock market debut success will have on Lichen China Limited, and the financial services sector in China as a whole?
The IPO raised gave the company a new injection of cash that helped them execute their business plan. It is difficult for Chinese banks to provide traditional financing without significant collateral and personal guarantees. Lichen, a Chinese-owned company, was able to access the US equity markets, giving other Chinese companies confidence.
We would be the ‘quarterbacks’ of the listing process as the issuer’s attorney on an IPO.
Lichen’s brand value has increased in the industry due to its Nasdaq listing. Business partners are more likely to feel comfortable doing business with a publically listed company rather than a private one.
As a publicly-traded company, Lichen, for example, can use its stock instead of cash to purchase other businesses that will support or expand the existing business lines. Lichen’s Nasdaq IPO was a major influence on many Chinese companies to launch their own IPO in 2023. It is estimated that two dozen Chinese issuers will list on a US stock exchange by 2023.
Do you have any additional comments to make regarding the work that your firm did in relation to the IPO.
It is not possible to take a company public on your own. All of our staff members are amazing, hardworking, and very knowledgeable lawyers. My partners have provided me with unlimited support to help complete each transaction. We always approach IPO clients with the mentality that ‘we are a team, and we will come out a team.’ We have created a collegial atmosphere of which I personally am very proud.
Are you expecting Ortoli Rosenstadt will work on similar operations by 2023?
Yes and no. The New York office will continue serving our global clients in the same way as it has always been. We are excited about the new opportunities that will be presented to us by 2023. We opened our Singapore office in October 2022 and a sister company under the name “Ortoli Rosstadt Ye Ptd. Ltd.”.
We are a foreign law firm fully registered and approved by the Ministry of Law of Singapore. This is our first flagship outside of New York. The firm has invested a lot of resources in setting up the Singapore affiliate and in marketing to establish a local presence within the ASEAN region. We are New York-based, but we aim to be more localized in our approach to meeting the needs and wants of clients in the ASEAN region. The goal is to show the US Capital Market to companies in the area and to educate those interested in how the US Capital Market can benefit the growth of the region.
We do not anticipate that this will change anytime soon. The launch of our Singapore Office has expanded our coverage in Asia to Southeast Asia. Our firm can now cover companies from countries like Singapore, Malaysia Indonesia, Thailand, and Vietnam. The time difference could even reach Australia, allowing us to serve our clients 24/7.
This is a part of the world that I believe has been overlooked and I can see for myself that there are many exciting things happening. Our goal is to help them by bringing cutting-edge US legal expertise to their doorstep. This is not limited to capital markets. This would also apply to other areas of practice, including real estate, corporate M&A, and even litigation or arbitral matters. This was a long-term strategic decision for us.
Jason Ye as Partner
366 Madison Ave., 3rd Flr., New York, NY, USA
Tel: +1 212-588-0022
Jason Yeis a partner at Ortoli Rosenstadt LLP, and co-chair of the Asia practice. Jason Ye’s practice focuses on cross-border capital market and corporate transactions. He has represented domestic and international firms, as well as investment banks and institutions investors in a wide range of transactions. Jason is one of the leading attorneys in this field. He also represents many public companies in Asia regarding their NYSE and Nasdaq listing, as well as post-listing.
Ortoli-Rosenstadt LLP represents US and International clients. Its multilingual staff provides services in corporate law, securities law, international transactions law, litigation, employment laws, franchising, and international tax, both on a domestic level and across multiple jurisdictions.