Delisting

In: Business and Management

Submitted By duanduan123
Words 2038
Pages 9
Chinese Companies’ Reaction to The Delisting Announcement

Background
The United States is one of the world’s most attractive places for a company to go public, especially for those mainland Chinese companies with funding needs. U.S. market gives those companies a chance to raise huge amounts of capital after their unsuccessful attempts to get bank borrowings in China. And compared with the traditional initial public offering process in the Chinese stock market, listing via reverse merger in the U.S. market seems to be much less expensive and time-consuming because mainland Chinese banks and China’s domestic capital market usually prefer the state-owned enterprises rather than privately owned companies.

There are three major reasons for Chinese companies to list in the U.S.:
First, the listing standards are lower in the U.S. Many Chinese Internet companies such as RenRen and YouKu did not meet Shanghai or Hong Kong listing standards at the time of their U.S. IPOs. They can either go public in the U.S. market or wait at least one year to meet the listing standards for Chinese exchange.

The Second reason is that those international investors such as venture capital firms prefer to invest in the U.S. market because it offers them an access to convertible currency and freely tradable shares.

The last reason is branding. Investors have always shown willingness to pay high prices for those Chinese stocks being listed in the U.S. market. It seems that there is prestige for those companies. So in order to get more attention in China, those Chinese companies would choose to list in the U.S. market.

However, the trend in Chinese listings on U.S. market has suddenly reversed and started accelerating in the opposite direction in recent years. Not only have less Chinese companies chosen to list on the U.S. market, there are also more and more Chinese companies…...

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