When China'S Stock Market Returns, It Is The Two Wave Of Listing In Hong Kong.

In June 11th and June 18th, NetEase and Jingdong were listed in Hong Kong for the two time, attracting investors.

Before and after this, Baidu, spelt, Ctrip, Zhong Tong express and many other stocks have also reported the two listing to Hong Kong.

"We are really concerned about the fact that the United States is tightening its control over the stock taking companies from the government level. We are constantly discussing what we can do, including the two listing in Hongkong and other places. Baidu chairman and CEO Robin Li said recently.

Privatization is also one of the options. Recently, jumei.com, Changhang and other companies have completed privatization, and the low valuation of US stocks is an important reason. 58 the city announced in June 15th that it had signed a privatization agreement with Quantum Bloom Group Ltd.. Thai bio is being released to prepare for privatization and return to the launch of the science and technology board. With the reform of A share registration system opening to the red chips, VIE and the different rights companies of the same stock, the SFC lowered the threshold for the listing of the red chip enterprises, and the door to A is also gradually opening.

The tide of stock return has surged.

The two wave of listing in Hong Kong

In April 2018, HKEx launched two new IPO rules, one of which is to allow companies with different rights structures to list on the HKEx. After the launch of the policy, Xiaomi and the US group have been listed on a fast track, and Alibaba has become the super star company that has taken the lead in the new regulation. At the end of 2019, Alibaba completed its two listing in Hongkong, raising $12 billion 900 million, becoming the largest transaction of HKEx in nine years.

Twenty-first Century economic report combing reporters found that recently, Baidu, spelling many, Ctrip, Zhong Tong express and many other Chinese stock companies have come out to Hong Kong for the two time.

"Hong Kong stocks are similar to the United States in terms of regulatory requirements and standards, presentation of financial statements, auditing of information disclosure, etc., and do not need to be prepared. If they communicate well, they will be able to return in 3 months' time." Before carrying Cheng, CFO, Baidu capital former management partner Wu Wenjie said.

Fu Tao, vice president of Huatai joint securities business, told the twenty-first Century economic report reporter that the two listing of the listed companies in Hong Kong was mainly due to three considerations: first, the reform of the listing system of the HKEx in 2018 allowed the listing of WVR (shares with different rights); second, the US Senate passed the foreign company Accountability Act, and the NetEase and Jingdong also listed on the eight market. It is disclosed that there is a risk of delisting if the inspection requirements of the US listed company accounting oversight committee are not met in time. Under the crisis of trust, pursuing a safer investment environment is also a common demand of A shares and Hong Kong stocks. Third, the Chinese stock market has more brand recognition in the Chinese market, and Chinese investors have a more thorough understanding of their business and a higher sense of trust in their business mode.

Zhang Linlin, chief tax officer of KPMG China, told the twenty-first Century economic news reporter that there are second main ways to return shares to Hong Kong stocks, double major listing and re application for listing after privatization. "At present, it is a good choice to return to Hong Kong stocks by second listing mode. The reason is that the second listing method provides convenience and flexibility in terms of application procedures and exemption of information disclosure requirements. However, it is more difficult to re apply for listing after privatization in terms of time, application procedures and regulatory requirements. She pointed out.

However, there are certain threshold conditions for the two listing in Hongkong. Enterprises need to be in an innovative industry, including new technologies, new ideas, new businesses, and certain requirements for intangible assets. The market value of the listed companies is HK $40 billion, or the market value is greater than HK $10 billion and the revenue is more than HK $1 billion. Any beneficiary of the same shares must be a board member of the company; the voting rights of different voting shares should not exceed 10 of the general voting rights. The relevant companies have had good compliance records in the last two fiscal years.

UBS predicts that the 42 Chinese companies listed in the US for the first time will meet the requirements of the two listing in Hongkong, accounting for 46% (543 billion dollars) of the total market capitalization of the stock market. Goldman Sachs reckon that if the total market capitalization of each company is based on the total market capitalization of 41 companies, the 41 US China stocks should meet the two listing requirements in Hongkong, and the list will be reduced to 32 according to the market value adjusted by the same shares.

Re capitals path

Privatization costs more than direct listing in Hong Kong for the two time. However, some companies that do not meet the requirements of the two listing will first choose privatization and then seek capital path.

Zhang Linlin pointed out that the cost of privatization in the stock market is first of all time cost, including the time cost of delisting in the US stock market, the time cost of dismantling the red chip structure, and if there is a re listing in the domestic market, there are also differences in the time for the listing of different sectors of the domestic capital market.

Tax cost is also a key and difficult point in the listing process. On the one hand, the cost of Taxation on the one hand, including privatization delisting, may cause transaction costs in China. The reason is that the core assets of listed companies are mainly equity or property in China, which will involve tax costs in China.

"In addition, in the process of dismantling the red chip structure, the premium generated by the original shareholders in obtaining the equity of the domestic company through equity transfer, and whether the original shareholders acquired the loss of the tax base when they acquired the shares of the domestic company will have a significant impact on the current dismantling of the red chip structure and the withdrawal of the tax cost in the future. Finally, the cost of capital should be considered in the process of privatization. For example, the cost of capital repurchases of privatized shares of reformed stocks will generate brokerage fees, lawyers and accountants in the process of privatization, dismantling of red chips and re listing. " Zhang Linlin told reporters.

However, with the continuous improvement of the A share and Hong Kong stock system and the more objective valuation level, although privatization has a certain cost, enterprises will weigh the pros and cons in the long run.

In twenty-first Century, according to the statistics of the economic report reporters, more than 30 Chinese stocks companies were privatized after the return of the stock market around 2015. Judging from the market performance after the return, most of the companies' valuation in the medium and short term has significantly increased, and the long-term trend has been stable. Such as Qihoo 360, Shanda game, giant network and so on.

Recently, many Chinese stock taking companies have taken the privatization step.

In June 15th, the 58 city announced that it had signed a privatization agreement with Quantum Bloom Group Ltd..

"The agreement has just been signed and is expected to be completed in the second half of the year." In June 19th, 58 city leaders responded.

Ruo Dacheng, this will be the largest case of privatization of Chinese companies listed in the US after Qihoo 360, and the largest privatization deal this year.

In 2018, Yao Jinbo, chairman of the 58 city and CEO, talked about the return of technology companies to A shares. He once said, "I really want to return to A shares and hope to become the first company to list shares in A shares." This also provides the imagination for the return of A shares in 58 cities.

Tiger Group's investment and research team pointed out that since the beginning of this year, privatization transactions have increased significantly, and the privatization agreements have been signed by the United States, Changyou, Yi Che, 58 cities and Zhengbao education. So far, the number of privatization this year has been the highest since 2015. From an investment perspective, tightening regulation is also accelerating the trend of privatization of SMEs. In the future, more companies may choose to privatize, and potential targets may be concentrated in companies that do not meet the two listing requirements.

"Unlike privatization in the past 2015-2016 years, the main body is private-owned enterprises. The main reason for the privatization of state-owned enterprises is the consideration of the reform and reorganization of state-owned enterprises. Based on the analysis of the reasons for the privatization of stock market over the years, there are basically the following points: the low market valuation is the general motivation for privatization of enterprises; the adjustment and reorganization of company strategy and structure; and the increasingly inclusive capital market in China is more attractive. From the perspective of bank investment bank, the relevant person in charge of M & A Financing Department of investment bank of Guangzhou branch of China Merchants Bank summarized the characteristics of privatization enterprises in the market at present.

Coincidentally, on the day of the signing of the 58 privatization agreement, the registration system reform of the growth enterprise market came into being. In April this year, the SFC adjusted the market value requirement of overseas red chip enterprises in the domestic market, and the red chip enterprises returned to the A threshold to reduce. Under a series of reforms, such as registration system, A shares have gradually opened the door to red chips, shares and different rights.

In June 19th, the audit committee of the science and technology board listed the audit of SMIC for the first 18 days. SMIC, which had delisted from the US stock market, fired the first shot of the overseas red chips back to A.

Reporters learned that, compared with the previous privatization and re adoption of IPO and backdoor listing in A shares, the red chip enterprises still have high financial indicators and technical standards in listing A shares. In addition, some supporting systems still need to be improved.

Zhang Linlin said that the rules governing foreign exchange supervision of funds across borders may also need to be further refined or clear, such as foreign exchange management of ESOP platforms. In addition, if there are some flexible arrangements in the overseas framework, such as trust, how to conduct corresponding supervision and tax treatment, the relevant supporting measures will be further clarified if the overseas architecture is returned to A shares.