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Chinese companies leaving Wall Street create opportunities (CHL, SHI)

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Reversing the trend of the past years, publicly listed Chinese stocks on US exchanges are now de-listing for a variety of factors. Due to fraud at some Chinese publicly traded companies, the entire sector was tainted.

Prices across the board for smaller Chinese stocks on US financial markets were dragged down. Now, to avoid compliance costs and other drains, many are going private.

In an article in USA Today by Kathy Chu, "U.S. Stock listings lose luster for some Chinese companies," it was reported that six had gone private in recent months. According to Chu's USA Today piece, "dozens more are in talks to do so, say lawyers working on the deals."

While blue-chip Chinese companies such as China Mobile ( CHL , quote ) or Sinopec Shanghai Petrochemical Co. ( SHI , quote ) have not suffered and are unlikely to leave the Big Board in the foreseeable future, smaller entities without the access to capital have been penalized.

As detailed in articles on www.emergingmoney.com , this has resulted in enticing financials and prices for many Chinese companies. However, it has not just been individual investors who have lost due to fraud. Goldman Sachs ( GS , quote ) and billionaire investors John Paulson have also been penalized.

Investors can profit from the premium that might be paid for shares being taken private. The long-term fate for many of these companies, predicts Peter Huang, a lawyer with Skadden Arps, will be a return to publicly traded markets in Hong Kong or mainland China.

Should this route be taken, there will be plenty of company: again this year, financial exchanges in China (Shanghai, Shenzhen, Hong Kong) raised more in initial public offerings for companies than the Big Board, almost twice as much according to an article in the Financial Times utilizing data from Deal Logic.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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