Data compiled by Bloomberg shows that, so far this year, US-listed Chinese companies have announced four go-private deals with a combined value of $8.1 billion including debt. That is up from zero during the same period last year and is also the highest value for any full year since 2015, when $29.8 billion worth of such buyouts were revealed.
This comes as US President Donald Trump considers placing more pressure on Chinese businesses, with Nasdaq preparing new rules that would make initial public offerings (IPOs) more difficult for some of them. This month, Trump accused China of benefiting from US capital markets “without complying with critical protections” and ordered regulators to come up with ways of tightening scrutiny of US-listed Chinese enterprises within the next 60 days.
The Nasdaq Golden Dragon China Index, which tracks Chinese companies listed in the United States, was up by over one percent on Tuesday in New York.
“The accelerated traction of Chinese companies listed in the US looking to go private relates to their outlook in weighing the advantages and disadvantages of maintaining a US listing status, particularly compliance costs and legal risks,” Christopher Ma, a consultant at law firm Simmons & Simmons in Hong Kong, told Bloomberg.
According to Steven Tran, a Hong Kong-based partner at law firm Mayer Brown, the coronavirus pandemic has also made some US-listed Chinese companies look relatively undervalued.
“Add in the generally negative sentiment in the US on all things China-related and you have the perfect recipe for an increase in take-private transactions,” he said.
Analysts point out that increasing numbers of US-listed Chinese firms are considering alternative venues to sell shares, with Hong Kong the favored destination for secondary listings so far. In China, the securities regulator is accelerating a reshuffle that could streamline the applications process for IPOs.
“Once privatized, these Chinese companies and their new owners will no doubt be pivoting towards Hong Kong and the mainland if a future relisting is ever on the cards again,” said Tran.
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