After decades of chasing the prestige of a US listing, Chinese companies can’t go private fast enough – here’s why.
Once a badge of honour among Chinese companies, a US listing was regarded as the alpha and omega for any Chinese corporation, offering greater control for its founders, better range of motion in mergers and acquisitions and above all prestige.
Fast forward to the coronavirus downturn and an increasing number of Chinese companies are looking to delist and go private as stock markets tank and US regulators ramp up the pressure.
In a sign that US regulators are moving towards zero tolerance, the US Securities and Exchange Commission (SEC) reiterated the importance of emerging market risk disclosure in a note to investors on its website on 21 April.
Despite the fact that many China companies are listed on US exchanges, they do not adhere to Sarbanes-Oxley Act accounting rules, a source of ongoing frustration for the Public Company Accounting Oversight Board (PCAOB) and SEC chairman Jay Clayton.
Clayton last week publicly warned investors against putting their money into Chinese companies that have continuing issues around company disclosures.
China Inc. kooks for the door
As a result, more US-listed Chinese companies are looking for a way out.
“We’ve had more inquiries coming from US-listed Chinese companies these days about privatisation,” one investment banker … [read more]