Delistings on hold as China CSRC slams a back door

(From Caixin Online)

US-listed Chinese companies planning to switch to a mainland exchange have been targeted by suspicious regulators

By staff reporters Yue Yue, Liu Ran and Qu Yunxu

It’s not uncommon for a retail investor in China to dabble in numerology, even subconsciously, while playing the stock market.

CSRC headquarters in Beijing

CSRC headquarters in Beijing

But after share prices surged for Shanghai-listed companies with the number “360” in their ticker symbol-like market codes, regulators found a new reason for alarm over backdoor listings that don’t add up.

The backdoor listing route through minor and shell companies has been cited as the most likely avenue for internationally known Chinese companies seeking to delist in the United States and raise new funds on a Shanghai or Shenzhen bourse.

Five companies have taken that route since 2013, regulators said, and a Caixin analysis of state media and company reports found dozens more were preparing to follow suit.

Yet the China Securities Regulatory Commission has decided to “conduct an in-depth study” of Chinese companies that have signaled interest in delisting from a U.S. stock market and relisting on the Shanghai A-share market through an initial public offering (IPO), merger or acquisition, CSRC spokesman Zhang Xiaojun said May 6.

The regulatory mood darkened further three days later when, in an article published in the official Securities Journal newspaper, a former CSRC branch director warned about possible market violations linked to backdoor listings and shell company investments. Zhang Yundong, who headed the agency’s Shenzhen office between 2000 and 2012, wrote in a commentary for the paper some market players may be defrauding investors by manipulating financial information and share prices. And some may be guilty of insider trading, he wrote. Read more

Categories: Asia Unhedged, China

Tags: , ,