Chinese Companies Going Private in U.S. Capital Markets

February 22, 2015

Fenwick & West corporate partner Niping Wu, who is based in Fenwick's Shanghai office, was quoted by the South China Morning Post in an article about the high number of Chinese companies that delisted from U.S. stock markets in 2014.​

"There is a growing trend of Chinese companies going private in U.S. capital markets," Wu said about the 14 delistings last year.

According to Wu, the trend is continuing in 2015. Two Chinese online gaming companies and a mobile and Internet security firm are currently undergoing privatization, she told the publication.

Two of the reasons for the delisting trend, Wu noted, are the burden of complying with U.S. regulations – including those initiated under the Sarbanes-Oxley Act – and the fact that Chinese companies are finding stronger valuations in Hong Kong's or China's A-share market than in the United States.

"In China, the price to earnings ratio is over 20 for online gaming firms, but in the U.S. it is around 10. The Chinese companies think they are better off delisting from U.S. markets and coming back to the Chinese market," Wu said.

The full artic​le is available through the South China Morning Post website.​​​