The value of Chinese companies delisting from US exchanges in 2011 exceeded the amount that Chinese companies raised via US initial public offerings in a stark sign of how fraud allegations and slowing growth have made many foreign investors bearish on Chinese groups.
Chinese companies with a combined equity value of $3.5bn were taken private in 2011 by management, strategic buyers and private equity groups, according to data compiled by Roth Capital Partners, a US advisory firm. A further $4.3bn of potential deals remain in progress. In 2010, almost no such deals were completed, according to Roth.
In contrast, US IPOs of Chinese companies raised only $2.2bn, about half the 2010 total, according to Dealogic and Thomson Reuters. No Chinese companies made it to market in the fourth quarter. According to Dealogic, all IPOs on US exchanges raised $41.9bn in 2011, down from $44.5bn in 2010.
Share prices of US-listed Chinese companies tumbled last year amid concerns that China’s growth could slow and allegations of accounting fraud at some Chinese companies listed overseas. Sino-Forest, for example, was suspended by Canadian regulators after being accused by short seller Muddy Waters of accounting fraud, which it denied. The USX China Index, which tracks US-listed companies that derive most of their revenue from China, fell 27 per cent in 2011.
For some management teams and private equity groups, the falls created opportunities to buy out companies with an eye to eventually relisting them, potentially in Hong Kong or the mainland where Chinese groups typically command higher valuations than in theUS
“The chairman or founders of these companies saw their listed vehicles falling 70-80 per cent in value [in theUS
One of the most high-profile deals was the $750m buy-out of Harbin Electric, an electric motor maker, by its chief executive, backed by Abax Global Capital, a Hong Kong-based fund. The company had been accused of fraud by a short seller, which it denied. Its Nasdaq-listed stock fell below $6 before shareholders accepted the offer of $24 a share.
The buy-outs come on top of a handful of delistings by Chinese companies forced off US exchanges for regulatory violations, such as failing to file financial reports.
The pace of dealmaking could slow. Sharp fourth-quarter falls on Chinese exchanges showed that relisting in Asia at a higher valuation may not be a given, said Mark Tobin, Roth’s codirector of research.
Chinese companies with a combined equity value of $3.5bn were taken private in 2011 by management, strategic buyers and private equity groups, according to data compiled by Roth Capital Partners, a US advisory firm. A further $4.3bn of potential deals remain in progress. In 2010, almost no such deals were completed, according to Roth.
In contrast, US IPOs of Chinese companies raised only $2.2bn, about half the 2010 total, according to Dealogic and Thomson Reuters. No Chinese companies made it to market in the fourth quarter. According to Dealogic, all IPOs on US exchanges raised $41.9bn in 2011, down from $44.5bn in 2010.
Share prices of US-listed Chinese companies tumbled last year amid concerns that China’s growth could slow and allegations of accounting fraud at some Chinese companies listed overseas. Sino-Forest, for example, was suspended by Canadian regulators after being accused by short seller Muddy Waters of accounting fraud, which it denied. The USX China Index, which tracks US-listed companies that derive most of their revenue from China, fell 27 per cent in 2011.
For some management teams and private equity groups, the falls created opportunities to buy out companies with an eye to eventually relisting them, potentially in Hong Kong or the mainland where Chinese groups typically command higher valuations than in the
“The chairman or founders of these companies saw their listed vehicles falling 70-80 per cent in value [in the
One of the most high-profile deals was the $
The buy-outs come on top of a handful of delistings by Chinese companies forced off US exchanges for regulatory violations, such as failing to file financial reports.
The pace of dealmaking could slow. Sharp fourth-quarter falls on Chinese exchanges showed that relisting in Asia at a higher valuation may not be a given, said Mark Tobin, Roth’s codirector of research.
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