New York exchange moves to delist CNOOC’s American depositary shares as Trump-era executive order kicks in

The NYSE said that trading in CNOOC Limited, the unit of China’s biggest producer of offshore oil and natural gas, would be suspended on March 9
The delisting would proceed as the NYSE determined that the shares were “no longer suitable” for listing because of the November 2020 order signed by former US President Donald Trump

Banking & finance

Chad Bray

Published: 1:30pm, 27 Feb 2021

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The New York Stock Exchange (NYSE) announced its decision to delist CNOOC Limited next month, effectively erasing one of the most prominent symbols of China’s embrace of global capitalism from the world’s largest capital market.

CNOOC Limited, a unit of China National Offshore Oil Corporation (CNOOC), would stop trading in New York on March 9 to comply with a November 20 executive order by former US President Donald Trump banning US investment in companies with purported ties to the Chinese military, as the oil company’s American depositary shares (ADSs) were “no longer suitable” for listing, NYSE said.

“The issuer has the right to a review of this determination by a committee of the board of directors of the exchange,” the NYSE said in a notice on its website after the market closed on Friday. “The NYSE will apply to the Securities and Exchange Commission (SEC) to delist the issuer’s securities upon completion of all applicable procedures, including any appeal of the NYSE Regulation staff’s decision.”

CNOOC Limited’s spokespeople did not immediately respond to requests for comment on Saturday.

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CNOOC Limited, based in Beijing, raised US$15.4 billion in February 2001 on the NYSE, in what was then the third-biggest fundraising in the global oil industry.

Coming on the heels of China’s official membership in the World Trade Organization (WTO), the listing was hailed as a symbol of China’s commitment to capital reforms, become a trailblazer that set the pace for subsequent listings by dozens of state-owned companies from banks to telecommunications companies in New York and Hong Kong.

A week after their New York listing, CNOOC’s shares listed in Hong Kong in a HK$11.2 billion initial public offering (IPO).

CNOOC’s Hong Kong-listed shares, dubbed “Red Chips” because of their state-owned provenance, have been more actively traded than their NYSE counterparts. Daily average turnover of CNOOC’s shares rose to 173.4 million shares in Hong Kong over the past 12 months, compared with 199,853 in New York, according to exchange data. One American depositary receipt of CNOOC is equal to 100 CNOOC shares in Hong Kong.

Wei Liucheng (centre), then chairman and chief executive of CNOOC Limited, during the company’s February 28, 2001 trading debut in Hong Kong. CNOOC’s shares rose 10 per cent in their trading debut. Photo: AFP

The move follows similar delistings this year of three of China’s biggest telecommunications companies: China Mobile, China Telecom and China Unicom. All three state-owned entities managed by government-appointed managers maintain their primary listings in Hong Kong, while listing their American depositary receipts in New York.

The NYSE first announced plans to delist the telecommunications companies on New Year’s Day, but reversed itself several times because of confusion about the scope of the Trump order. The companies were ultimately delisted, but not before asking the NYSE to reconsider its decision just hours after Joe Biden was sworn in as the 46th US President.

The Chinese telecoms companies were among the first targets on Trump’s November 12 executive order that barred American investors from owning or trading in companies that the US claims are owned or controlled by the Chinese military. That initial list has been expanded several times since.

It was one of a series of moves in the waning days of his administration to limit access by Chinese companies to American capital markets and technology, including adding CNOOC Limited’s corporate parent to the so-called entity list in January. The designation makes it harder for US companies to sell technology and engage in other transactions with the Chinese oil giant.

American investors, including pension funds and university endowments, have until November 11, 2021 to fully divest their holdings in any designated Chinese military companies following the executive order.

Biden’s administration put a stay in January on some of the targeted entities, delaying until May 27 a ban on American investments in companies that have similar names to the blacklisted Chinese firms. That ban had been set to go into place on January 29. The Biden administration is undertaking “complex reviews” of various Trump policies towards China, White House press secretary Jen Psaki said at the time.

The moves reinforced the expectation that the Biden administration would be more predictable in its dealings with Beijing, although relations remain strained between the world’s two biggest economies.

Still, in his first call with President Xi Jinping this month, Biden pressed Xi on several issues, including trade and human rights. US Secretary of State Antony Blinken also has warned that the US would work with allies and partners to hold China accountable on issues threatening regional stability.