[ad_1]
Some of China’s most valued state-owned companies may abandon their U.S. listings within months, experts have warned, after reports revealed Beijing was considering a broader crackdown on tech companies going public overseas.
The development means more than $ 2 billion (£ 1.5 billion) of capital invested in US stocks of Chinese companies could be at risk.
Information released on Friday suggested Beijing was set to take further action against tech companies that process sensitive customer data, forcing them to seek formal approval for initial public offerings (IPOs) outside of China.
It is seen as Beijing’s latest effort to overthrow a permissive regulatory regime that, until recently, allowed companies to bypass local regulations in order to seek foreign investment.
The news, first reported by The Wall Street Journal, comes weeks after it emerged that US regulators were planning to increase oversight of Chinese companies in hopes of launching IPOs in the United States. .
Taken together, the pressure from these policies has likely dealt a fatal blow to the plans for an IPO in New York for the US division of video app TikTok. Its parent company, ByteDance – last valued at $ 180 billion – has also considered listing in Hong Kong.
Investors fear a possible wave of delisting of Chinese companies from US stock exchanges if the global crackdown continues. “It’s not just possible, it’s likely,” warned Jay Ritter, a professor at the Warrington College of Business at the University of Florida, adding that the radiation could occur en masse “within a few months.”
The exit of the Chinese titans from the New York stock exchanges could have an impact on trade and sentiment in global stock markets. “In general, these ripple effects are never good because they have unintended consequences,” said John Byrne, analyst at GlobalData.
There is precedent for such a movement. About a decade ago, more than 100 Chinese companies were delisted from the US markets after a series of accounting scandals that sparked closer scrutiny from investors in North America and caused stock prices of Chinese companies to plummet.
“When prices fell, a number of these companies decided that the attractiveness of being listed in North America was not as great as they had been, and they went off the list and have instead been re-registered in China. So there are precedents, ”said Ritter, known as“ Mr IPO ”for his extensive work on the subject.
According to the U.S.-China Economic and Security Review Commission, a U.S. government agency, about 248 Chinese companies, with a combined value of $ 2.1 billion ($ 1.5 billion sterling), were listed on the US stock exchanges in May of this year. While this is paltry compared to the roughly $ 46 billion market capitalization of the entire U.S. market, the potential impact could be huge.
It all depends on whether Chinese companies end up canceling their shares altogether, in a process sometimes referred to as “going dark,” or whether they take advantage of falling stock prices to buy out foreign shareholders at a fraction of their original value.
Investors have become pessimistic. A sale of shares has sent the Nasdaq Golden Dragon Index, which tracks Chinese companies listed in New York City, down nearly 50% since February.
Last month, regulators launched an investigation into the handling of customer data by the Chinese ridesharing app Didi, just days after its introduction on Wall Street. Truck haulage company Full Truck Alliance and online recruiting platform Boss Zhipin have also undergone regulatory review. And last November, the shares of big companies such as online retail giant Alibaba, Tencent and JD.com all fell after Beijing released draft plans to “prevent and stop monopoly behavior” by companies. Internet platforms.
Now China is targeting overseas listings. Ritter said Beijing is probably trying to deal with the embarrassment of having so many top companies like Alibaba traded in the United States rather than Shanghai. “It would be a little embarrassing for the UK if British Petroleum, or some other high profile UK company, said, ‘Well, you know, London is not good enough for us,'” he said. Explain.
Companies such as Alibaba and Tencent have traditionally used a corporate structure known as a variable interest entity – which has been in place for about two decades – to register overseas and gain access to foreign investment. . However, the China Securities Regulatory Commission (CSRC) could force companies to seek approval for overseas listings with an inter-ministerial committee involving the Chinese internet watchdog and the CSRC itself.
Source link
