Chinese IPOs in US overshadow growing market retreat
High compliance costs and low valuations contributed to 14 Chinese companies choosing to delist from United States stock markets last year
A bumper year for Chinese IPOs in the United States last year - thanks largely to Alibaba's record US$25 billion listing - has overshadowed a retreat from that market by almost as many Chinese firms that entered it.
Fourteen Chinese companies delisted from US stock markets last year due to concerns over compliance costs and low valuations amid allegations of fraud against a number of firms that spilled over into broader suspicion of Chinese enterprises.
Three Chinese firms are now being privatised in the US stock markets, said Wu Niping, a Shanghai-based partner at US law firm Fenwick & West, naming them as online gaming firms Perfect World and Shanda Games, and mobile and internet security firm NetQin. "There is a growing trend of Chinese companies going private in US capital markets," Wu said.
The 14 firms that delisted had a total privatisation value of more than US$7 billion, according to data compiled from media reports. They include eight information technology firms. Fifteen mainland and Hong Kong firms completed initial public offerings in the US last year, raising US$28.6 billion, according to media reports.
Wu cites the high compliance costs that come with a US listing as a key motivation for a delisting. The Sarbanes-Oxley Act of 2002, a response to a spate of corporate and accounting fraud cases, adds significant compliance burdens on listed companies.
Dane Chamorro, Asean managing director of consultancy Control Risks, said a crackdown by the US Securities and Exchange Commission (SEC) on accounting irregularities among a number of Chinese firms was also a factor.