4 Reasons Chinese Companies Ipo in America

1095 WordsJun 4, 20135 Pages
4 Reasons Chinese Companies IPO in America Why do so many good Chinese companies go public in foreign markets rather than let domestic investors share in the profits of growth? Chinese investors often complain about why would “good companies”, like Tencent (0700.HK), Baidu (NASDAQ: BIDU) and Sina (NASDAQ: SINA), choose to list in the US and Hong Kong instead of on the Chinese A-shares market. There are four main reasons: 1. If a ‘Chinese’ company takes foreign investment using a VIE structure, it can only list abroad 2. Many companies don’t meet the strict financial standards for a Chinese listing 3. China’s listing process takes a long period of time and not very transparent, a torturous examination compared with America’s…show more content…
But these ‘good intentions’ only end up leading everybody astray from the original market intention. The quality of companies listed on the A-Shares Market is far from satisfactory, while most of the companies with the best growth potential and highest returns to investors list abroad. Moreover, the A-Shares Market remains one of the capital markets with the largest fluctuations in the world! The conclusion should be fairly simple: regulatory agencies should not and cannot be held responsible for a company’s quality through an IPO review. The operational risk of a company does not move in lock step with static indicators like financial data. Regulatory agencies should not and cannot be responsible for the fluctuations in the secondary market. Fluctuations of the market can never be contained by up or downward limits, nor can the regulator effectively set the “IPO rhythm.” Chinese companies will continue to list abroad, despite sky-high A-Share Market valuations To be fair, under the elaborate care of regulatory agencies, A-Shares do have their own magic, that is, a super financing power. Especially in the fiery Growth Enterprise Market over the last year, PE ratios frequently shoot up to 100x. Every single listed company has been overjoyed to get more funds than planned. With such “stupid wealthy people” circumstances,

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