China’s Booming Stock Market

eric-gerster-chinese-stocksChina’s booming stock market is making itself known here in the United States. The Chinese stock market’s recent success is causing so challenges as well. Chinese chief executives are looking toward their home country’s economy and are considering and even making the move to take their U.S.-traded companies private.

As of today, 10 U.S.-traded Chinese companies have announced plans to delist their shares, solely in 2015. The delisting of these shares will total just over $12 billion. This increase in delistings dwarfs last year’s announcement of only one U.S.-listed Chinese company that went private.

This week specifically is extremely important as multiple deals are being made and most likely finalized. 21Vianet Group has a $2 billion offer on the table to go private, Renren Inc. has a $1.1 billion offer, and E-House Holdings Ltd. will go private for $894 million.

Bao Fan, founder of China Renaissance was quoted in saying, “The primary motivation is the valuation gap between the U.S. market and the A-share market.” China Renaissance is China’s best boutique investment bank. They solely focus the business efforts on technology companies. Fan went on to say “Historically, Chinese capital markets weren’t sophisticated enough to evaluate and invest in these companies. That’s changed.

The shift in listings and the push towards privatizing these companies is due to Chinese listing rules loosening and the growing valuations of China’s domestic exchanges. This shift is coaxing not only Chinese executives to move their organizations back to China, but also enticing other companies to list in Shanghai.

 

Thank you for reading,

Eric Gerster