More U.S.-listed Chinese firms may go private

2015-06-12 10:06Global Times Editor: Li Yan

Analysts believe companies may return home to rising A-share market

Many U.S.-listed Chinese companies have received proposals to go private, and analysts on Thursday said that more are expected to jump onto the bandwagon as China pushes on with the opening-up of its stock market.

Renren Inc, once dubbed the Facebook of China, and 21Vianet Group Inc, a Beijing-based data center services provider, are the latest that have joined the ranks of Chinese companies that have lost interest in the U.S. stock market.

Late on Wednesday, Renren announced that the company has received a non-binding going-private transaction proposed by Renren's CEO Chen Yizhou and COO Liu Jian, who plan to acquire all outstanding ordinary shares they do not hold for $4.2 per American depositary share (ADS).

Together, Chen and Liu own 32 percent of Renren, representing 49 percent voting power, according to a press release posted by the company on its website on Wednesday.

On the same day, Chen Sheng, 21Vianet's CEO, together with two other Chinese tech companies - Kingsoft Corp and Tsinghua Unigroup International Co, also announced an offer to acquire all outstanding ordinary shares of 21Vianet they do not own for $23 per ADS.

Online dating platform International, mobile Internet company Sungy Mobile, and tutor service provider Xueda Education Group are among companies that have received going-private proposals earlier in 2015, while Chinese online game developer Shanda Games in April said that it has agreed to be taken private for $1.9 billion.

These companies, which are mostly from the tech industry, chose to get listed in the US because China has set a higher threshold, such as profitability requirement, on IPOs. The going-private trend comes as Chinese authorities are considering a registration-based IPO system that will lower the threshold, said analysts.

Xiao Gang, chairman of China Securities Regulatory Commission, was quoted by media reports in March as saying that China is ready to implement the registration-based IPO system, which is reportedly to come out within this year.

"Chinese companies can save lots of costs in coping with the stricter regulation and supervision in the US by getting listed on China's A-share market," Dong Dengxin, director of the Financial Securities Institute of Wuhan University of Science and Technology, told the Global Times Thursday.

Many U.S.-listed Chinese companies, including 21Vianet and e-commerce giant Alibaba Group Holding, have faced class action lawsuits by investors for allegedly issuing false and misleading statements.

In addition to the attempt to seek lower supervision costs in China, the going-private companies may also raise more money in China's bullish stock market, said Dong. "Now that the A-share market is performing strongly, Chinese tech companies can likely obtain a high evaluation for their offerings."

Having chosen to get listed on the Shenzhen bourse instead of in the U.S., Beijing Baofeng Technologies Co, an entertainment service provider, saw its share rise by the daily limit of 10 percent to hit 307.56 yuan ($49.55) on Wednesday, up 32 percent from its opening price in March. The trading of Baofeng was halted on Thursday, pending the disclosure of an important issue.

China's ChiNext, a NASDAQ-style board for high-tech and emerging start-ups, has gained 9 percent since the beginning of June to 3,862.14 points on Thursday, following five consecutive monthly double-digit rises.

Zhang Yi, CEO of Guangzhou-based market research firm iiMedia Research, also thinks more U.S.-listed Chinese companies will return to the domestic stock market but he does not believe this is a good option.

"China's A-share market has become more open, but it is still unstable and full of bubbles. The current surge in the stock market will not last for long," Zhang told the Global Times Thursday.

Rather than seeking more money in the A-share market, Zhang noted that those companies are more likely trying to stop disclosing dissatisfactory financial reports to the public.

Renren, for instance, in early May reported a net loss of $27.6 million in the first quarter of the year, in comparison with a $32.3 million net income over the same period of the previous year, in the face of challenges from rising social networking mobile apps such as WeChat.

Following the disclosure of its going-private proposal, the NYSE-listed Renren saw its shares drop 2.92 percent to $3.99 on Wednesday (U.S. time), much lower than its $14 offering price four years ago. NASDAQ-listed 21Vianet, which recorded a narrowing net loss in the first quarter from the previous year's 151.4 million yuan to 88.7 million yuan, closed up 9.74 percent to $21.85.

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