Chinese Companies Retreat From US Listing

Chinese companies are deserting U.S. stock markets in record numbers as regulatory scrutiny mounts and the advantages of a U.S. listing slip away.

U.S. government investigations of suspect financial reports and battered share prices have for many Chinese companies wrecked the chances of raising new money in the United States and given them little reason so stay, China experts said.

“There’s very little in way of new capital flows to those companies, their valuations are low and they’re encountering significant headwinds in terms of regulatory oversight,” said James Feltman, a senior managing director at Mesirow Financial Consulting.

Twenty-seven China-based companies with U.S. listings announced plans to go private through buy-outs in 2012, up from 16 in 2011 and just six in 2010, according to investment bank Roth Capital Partners. Before 2010, only one to two privatizations a year were typically done by China-based companies, Roth said.

In addition, about 50 mostly small Chinese companies “went dark,” or deregistered with the U.S. Securities and Exchange Commission, ending their requirements for public disclosures. That was up from about 40 in 2011 and the most since at least 1994, when the SEC’s records start.

Companies with a limited number of shareholders can voluntarily go dark and rid themselves of the cost of public filings without buying out investors, but those investors often suffer as the value of their shares falls.

“It’s just another black eye for (Chinese) U.S.-listed companies,” said James O’Neill, managing director of Jin Niu Investment Management Co, a Beijing-based firm.

Meanwhile, just three Chinese companies successfully went public on U.S. exchanges in 2012, down from 12 in 2011 and 41 in 2010.

About 300 China-based companies still have shares trading in the United States on exchanges or “over-the-counter” between individual dealers.