In separate statements issued Friday, China Life Insurance, PetroChina, Sinopec, Aluminum Corporation of China and Sinopec Shanghai Petrochemical said they had notified the NYSE and applied for “voluntary delisting.”
All five companies cited “low turnover in the US” and “high administrative burden and costs” as their reason for the departure.
However, the news comes after all five were flagged by the US Securities and Exchange Commission in May, according to Reuters, for failing to meet US auditing standards.
China’s securities watchdog, the China Securities Regulatory Commission, said on Friday that it is aware of the situation and that “it is normal for companies to list or delist from any market.”
“We will keep in touch with foreign regulatory institutions and protect the rights of corporations and investors together,” it said.
Increasing scrutiny
The news comes as the Securities and Exchange Commission increases its scrutiny of Chinese companies’ audits.
The commission can kick companies off the stock exchange if they fail to allow US watchdogs to inspect their financial audits for three straight years. China has for years rejected US audits of its firms.
Chinese companies that are traded overseas are required to hold their audit papers in mainland China, where they cannot be examined by foreign agencies.
But in April, China’s securities watchdog proposed changing a decade-old rule that forbids Chinese firms from sharing sensitive data and financial information with overseas regulators. The amendment could allow US regulators to inspect audit reports of Chinese companies listed in New York.
Nevertheless, companies like Alibaba are taking steps to prepare for a potential loss of direct access to the US capital market.
In late July, the Securities and Exchange Commission added Alibaba to a list of more than 150 companies that could face expulsion if their audits could not be inspected in the next three years, joining some of China’s largest companies like JD.com and Baidu.
Even before the commission added Alibaba to its watch list, the company announced it would seek a primary listing on the Hong Kong stock exchange.
Currently, Alibaba has a secondary listing on the Hong Kong stock exchange.
“A primary listing status in Hong Kong gives Chinese ADRs (American Depository Shares) an optionality to diversify their listing risk and retain access to the public equity market” if they are forced to leave the United States, said Goldman Sachs analysts in a recent report.
If the transition goes smoothly for Alibaba it could “set the path” for many more Chinese ADRs to pursue a similar switch, Citi analysts said.
SHANGHAI/HONG KONG, Aug 12 (Reuters) – Five Chinese state-owned firms including China Life Insurance (601628.SS) and oil giant Sinopec (600028.SS) said Friday they would delist from the New York Stock Exchange, amid heightened diplomatic and economic tensions with the United States.
The companies, which also include Aluminium Corporation of China (Chalco) (601600.SS), PetroChina (601857.SS) and Sinopec Shanghai Petrochemical Co (600688.SS), said in separate statements that they would apply for delistings of their American Depository Shares from later this month.
The five, which were added to the Holding Foreign Companies Accountable Act (HFCAA) list in May after they were identified as not meeting U.S regulators’ auditing standards, will keep their listings in Hong Kong and mainland Chinese markets.
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There was no mention of the auditing row in separate statements by the Chinese companies outlining their moves, which come amid heightened tensions after last week’s visit to Taiwan by U.S. House of Representatives Speaker Nancy Pelosi.
Beijing and Washington have been in talks to resolve a long-running dispute that could mean Chinese firms being kicked off U.S. exchanges if they do not comply with U.S. audit rules.
“These companies have strictly complied with the rules and regulatory requirements of the U.S. capital market since their listing in the U.S. and made the delisting choice for their own business considerations,” the China Securities Regulatory Commission (CSRC) said in a statement.
Some of China’s largest companies including Alibaba Group Holdings , J.D Com Inc and Baidu Inc are among almost 270 on the list and at threat of being delisted.
Alibaba said last week it would convert its Hong Kong secondary listing into a dual primary listing which analysts indicated could ease the way for the Chinese ecommerce giant to switch primary listing venues in the future. read more
In premarket trade Friday, U.S.-listed shares of China Life Insurance and oil giant Sinopec fell 5.7% about 4.3% respectively. Aluminium Corporation of China dropped 1.7%, while PetroChina shed 4.3%. Sinopec Shanghai Petrochemical Co shed 4.1%.
“China is sending a message that its patience is wearing thin in the audit talks,” said Kai Zhan, senior counsel at Chinese law firm Yuanda, who specialises in areas including U.S. capital markets and U.S. sanction compliance.
Washington has long demanded complete access to the books of U.S.-listed Chinese companies, but Beijing bars foreign inspection of audit documents from local accounting firms, citing national security concerns.
The companies said their U.S. traded share volume was small compared with those on their other major listing venues.
PetroChina said it had never raised follow-on capital from its U.S listing and its Hong Kong and Shangai bases “can satisfy the company’s fundraising requirements” as well as providing “better protection of the interests of the investors.”
China Life and Chalco said they would file for delisting on Aug. 22, with it taking effect 10 days later. Sinopec and PetroChina said their applications would be made on Aug. 29.
China Telecom (0728.HK), China Mobile (0941.HK) and China Unicom (0762.HK) were delisted from the United States in 2021 after a Trump-era decision to restrict investment in Chinese technology firms. That ruling has been left unchanged by the Biden administration amid continuing tensions.
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Reporting by Samuel Shen in Shanghai, Scott Murdoch in Hong Kong and Medha Singh in Bengaluru; Editing by Hugh Lawson, David Goodman and Alexander Smith
Our Standards: The Thomson Reuters Trust Principles.
The regulatory environment is tough for Chinese stocks, but delisting doesn’t happen overnight.
Angela Weiss/AFP via Getty Images
Didi Global
‘s plans to delist from the New York Stock Exchange months after going public triggered concerns over the future of other U.S.-listed Chinese companies.
Chinese tech stocks have borne the brunt of this blow to market sentiment, with the
Hang Seng Tech Index
—which tracks the Hong Kong-listed shares of China’s largest technology companies—hitting an all-time low earlier this week.
Alibaba
(ticker: BABA) and
JD.com
(JD), which are listed in both Hong Kong and the U.S., have been some of the biggest losers.
Didi’s delisting decision comes amid brewing regulatory pressures in both Washington and Beijing. The Securities and Exchange Commission finalized rules last week that would force foreign companies to open their books to U.S. auditors or be delisted from U.S. markets if they don’t comply for three years. Reports from China, beginning last week and continuing this week, indicate that the country’s market regulator is scrutinizing the corporate structure used by companies that list overseas.
Analysts are split on what will happen next for Alibaba, JD.com, and other U.S.-listed Chinese stocks. “The risk of eventual delisting is real,” Robin Zhu, a Bernstein analyst, told Barron’s. Needham analyst Vincent Yu doesn’t agree: “On the Chinese regulator’s side, there’s no intention to delist them.”
Mass delistings would be a chaotic and dramatic move. And as Barron’s has previously reported, experts think regulators could reach a compromise within the three-year window provided by the SEC’s rule that would prevent delisting. But concerns and regulatory pressure are unlikely to disappear soon.
Here’s what investors should consider if they own these stocks.
What Are ADRs and How Do They Work?
Investors in U.S.-listed foreign companies own shares of an American depositary receipt, or ADR. Here’s how they work.
U.S. banks bundle shares of foreign-listed companies into ADRs, which are issued as stock that can be traded on U.S. exchanges in dollars. Foreign companies, in turn, gain access to U.S. capital.
But in the case of a U.S.-listed Chinese stock, investors own shares in an offshore holding company. These shell companies are called variable interest entities, or VIEs, and are a corporate structure used by Chinese companies to circumvent Beijing’s rules about foreign investment while still tapping U.S. capital. The offshore company has a contractual relationship with the operating company, which means investors don’t have a direct stake.
VIEs are under scrutiny in both the U.S. and China. SEC Chair Gary Gensler said earlier this year he worried investors didn’t realize how these companies work and pushed for more oversight and transparency. Based on recent reports from China, regulators in Beijing are also looking to crack down on VIEs, especially technology or data-heavy companies.
What Happens to Your Shares When a Company Delists?
If a U.S.-listed Chinese company like Didi delists, there are essentially three possible outcomes for investors: a share buyback, share transfer, or share limbo.
In a buyback scenario, the Chinese company could purchase its shares back from investors at a price agreed upon by shareholders—effectively going private. If the company wishes to go public again, it would do so in a separate listing in the likes of Hong Kong.
In a share transfer scenario, investors would swap their ADR for the Chinese company’s foreign stock. In the case of Didi, which doesn’t have a secondary listing, would need to first launch a listing—in Hong Kong or Shanghai, for instance— to establish both a home for its foreign stock and mechanism for the transfer of ADRs.
If Didi doesn’t buy back shares, but rather delists and doesn’t launch another listing, the ability to trade its shares would be in limbo. Investors would still own equity in the company, but they’d be unable to trade their stock on regulated exchanges. They could sell their shares in over-the-counter markets—with limited liquidity—or hold on to them until a suitable listing was launched.
China Mobile ,
which was blacklisted by the Trump administration because of its ties to China’s military, remains a cautionary tale. The widely held stock was forced to delist from the New York Stock Exchange, leaving many individual investors unable to execute trades or transfers at their U.S. broker.
What Choices Do Investors Have?
Concerned investors have a few options if they believe that they own stock that could be delisted and want to get ahead of the risk.
The first is to sell their stake in U.S.-listed Chinese companies. If investors still want to own shares of Chinese companies, they can try to buy a stake on a foreign exchange through a brokerage. That option isn’t available on every brokerage, though.
There are other options too, including converting an ADR into a stake. Explore those options at the links below:
• How to Buy Chinese Stocks Now That U.S.-Listed Shares Have Become Risky
Just five months after its debut, ride-hailing giant Didi Global said it plans to withdraw from the New York Stock Exchange and pursue a Hong Kong listing, a stunning reversal as it bends to Chinese regulators angered by its US IPO.
The company’s shares were down around 15% after swinging between gains and losses in premarket trading as investors initially bet the move would appease Beijing and serve as a catalyst for a revival of its business prospects at home. Shares of the company plunged by day’s end, closing down 22%..
“Following careful research, the company will immediately start delisting on the New York stock exchange and start preparations for listing in Hong Kong,” Didi said on its Twitter-like Weibo account on Friday.
Didi did not explain its reasons for the plan but said in a separate statement it would organize a shareholder vote at an appropriate time and ensure its New York-listed stock would be convertible into “freely tradable shares” on another internationally recognized stock exchange.
Sources told Reuters last month that Chinese regulators had pressed Didi’s top executives to devise a plan to delist from the New York Stock Exchange due to concerns about data security.
Didi shares plunged 22 percent on news the company was delisting from NYSE.Barcroft Media via Getty Images
Didi’s board convened on Thursday and approved the US delisting and HK listing plans, said two sources with knowledge of the matter.
Didi pushed ahead with a $4.4 billion U.S. initial public offering in June despite being asked to put it on hold while a review of its data practices was conducted.
The powerful Cyberspace Administration of China (CAC) then quickly ordered app stores to remove 25 of Didi’s mobile apps and told the company to stop registering new users, citing national security and the public interest.
Didi, led by CEO Cheng Wei, did not explain its reasons for deciding to delist from the NYSE but said in a separate statement it would organize a shareholder vote at an appropriate time.Visual China Group via Getty Images
Didi, whose apps, in addition to ride-hailing, offer products such as delivery and financial services, remains under investigation.
Redex Research analyst Kirk Boodry, who publishes on Smartkarma, said there is an expectation Didi may need to buy shares at the $14 IPO price to avoid legal issues and at the very least will pay more than the shares current trading price.
However, there was still uncertainty over what the delisting means for investors. “There may also be some hope that by doing this, Didi management will improve its regulatory relations, but I am less confident on that,” Boodry added.
Didi is not alone in its dealings with China. Billionaire Jack Ma also ran afoul of Chinese authorities, leading to the dramatic scuppering of a mega-IPO for Ant Group last year.Visual China Group via Getty Images
The upending of Didi’s New York listing – likely to be a difficult and messy process – illustrates both the huge clout that Chinese regulators possess and their emboldened approach to wielding it.
Billionaire Jack Ma also ran afoul of Chinese authorities after blasting the country’s regulatory system, leading to the dramatic scuppering of a mega-IPO for Ant Group last year.
Did’s move will likely further discourage Chinese firms from listing in the United States and could prompt some to reconsider their status as U.S. publicly traded companies.
The upending of Didi’s New York listing illustrates both the huge clout that regulators in China — led by President Xi Jinping — possess and their emboldened approach to wielding it.Getty Images
“Chinese ADRs face increasing regulatory challenges from both U.S. and Chinese authorities. For most companies, it will be like walking on eggshells trying to please both sides. Delisting will only make things simpler,” said Wang Qi, CEO at fund manager MegaTrust Investment (HK).
Didi is planning to proceed with a Hong Kong listing soon and is not looking at being taken private, sources with knowledge of the matter told Reuters.
It aims to complete a dual primary listing in Hong Kong in the next three months and delist from New York by June 2022, said one of the sources.
Didi provided 25 million rides a day in China in the first quarter, according to its IPO prospectus. It made its New York debut on June 30.South China Morning Post via Getty Images
The sources were not authorized to talk to the media and declined to be identified. Didi did not immediately respond to Reuters’ requests for comment, and the CAC has yet to comment on its announcement.
“Not long after the IPO U.S. investors had been trying to sue DiDi for failing to disclose its ongoing talks with the Chinese authorities. This is unlikely to be taken any better,” said William Mileham, an equity analyst at Mirabaud. “It appears that DiDi are not waiting to be dual-listed, but could well be de-listed from the U.S. before it starts trading on the HK stock exchange.”
Listing in Hong Kong, however, might prove complicated, particularly in a tight three-month timeframe, given Didi’s history of compliance problems and the scrutiny it has faced over unlicensed vehicles and part-time drivers.
Didi may be eyeing listing in Hong Kong, but that might prove complicated given Didi’s history of compliance problems and the scrutiny it has faced over unlicensed vehicles and part-time drivers.AFP via Getty Images
The Hong Kong bourse does not comment on individual companies, a spokesperson said. Shares on the exchange however jumped 4% on prospects of a Didi listing.
Didi provided 25 million rides a day in China in the first quarter, according to its IPO prospectus. It made its New York debut on June 30 at $14 per American Depositary Share, but those shares had slid 44% by Thursday’s close, valuing it at $37.6 billion.
Its main shareholders are SoftBank’s Vision Fund, with a 21.5% stake, and Uber Technologies Inc, with 12.8%, according to a filing in June by Didi.
Sources have also told Reuters that Didi is preparing to relaunch its apps in China by the end of the year in anticipation that Beijing’s cybersecurity investigation of the company would be wrapped up by then.
Didi Chuxing, the Chinese ride-hailing group hit by Beijing’s regulatory crackdown on technology companies, said it would delist from the New York Stock Exchange in an acceleration of China’s decoupling from US capital markets.
The company wrote on its official Weibo account on Friday that it would begin the process of delisting and prepare to go public in Hong Kong.
The company said its board had authorised the New York delisting of its American depositary shares “while ensuring that ADSs will be convertible into freely tradable shares of the Company on another internationally recognized stock exchange”.
Hong Kong’s Hang Seng Tech index, which tracks 30 of China’s biggest technology companies, fell as much as 2.4 per cent on Friday following the news. Ecommerce group Alibaba was down 5.3 per cent, food delivery service Meituan dropped 4.8 per cent and internet group Tencent lost 3.2 per cent.
Regulators ordered Didi’s app to be taken off domestic app stores in July, days after the ride-hailing group raised $4.4bn in the biggest Chinese listing in the US since Alibaba in 2014. The company was also banned from signing up new users.
The initial public offering, which was completed just days before the Chinese Communist party celebrated its centennial, angered party and government officials who felt the group had brushed aside their concerns related to its national security and its vast trove of mapping and other sensitive data.
Didi launched its New York IPO in the middle of a long-running crackdown on the dominance of China’s biggest technology groups. The regulatory assault began in November 2020, when President Xi Jinping ordered the last-minute halt of the Shanghai and Hong Kong dual listing of Ant Group, Jack Ma’s fintech platform.
Ma, once the country’s richest and most celebrated entrepreneur, had angered Xi and other officials by criticising Chinese financial regulators weeks before the planned IPO, which was set to be the world’s bigger ever.
Since the scuppered listing, Ma, who also founded ecommerce platform Alibaba, has since all but disappeared from public view.
Didi’s rush to delist comes just ahead of the end of a six-month lock-up at the end of December that would allow company executives and almost all of its shareholders to begin dumping shares in New York.
“The government can order something without realising how complicated it is,” said a lawyer in Beijing, who believed Didi’s executives would probably need to contribute their shares to make such a transaction feasible.
Didi said it would hold a shareholder vote on the matter in the future.
Additional reporting by Emma Zhou in Beijing and William Langley in Hong Kong
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SHANGHAI, Nov 26 (Reuters) – Chinese regulators have asked top executives of ride hailing giant Didi Global Inc (DIDI.N) to devise a plan to delist from U.S. bourses on data security fears, Bloomberg News reported.
China’s tech watchdog wants the management to take the company off the New York Stock Exchange on concerns about leakage of sensitive data, the report said, citing people familiar with the matter.
Didi and the Cyberspace Administration of China did not respond to Reuters requests for a comment. Shares in SoftBank Group Corp (9984.T), which has a minority stake in Didi, fell more than 5%.
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Proposals under consideration include a straight up privatization or a share float in Hong Kong followed by a delisting from the United States, according to the news report.
If the privatization proceeds, shareholders would likely be offered at least the $14 per share IPO price, since a lower offer so soon after the June initial public offering could prompt lawsuits or shareholder resistance, the report said, citing sources.
Didi ran afoul of Chinese authorities when it pressed ahead with its New York listing in June, even though the regulator had urged the company to put it on hold while a cybersecurity review of its data practices was conducted, sources have told Reuters.
Soon after, the CAC launched an investigation into Didi over its collection and use of personal data. It said data had been collected illegally and ordered app stores to remove 25 mobile apps operated by Didi.
Didi responded at the time by saying it had stopped registering new users and would make changes to comply with rules on national security and personal data protection, and would protect users’ rights.
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Reporting by Brenda Goh in Shanghai and Sneha Bhowmik in Bengaluru; Editing by Arun Koyyur and Sam Holmes
Our Standards: The Thomson Reuters Trust Principles.
Back in June, Syndicate and Ultima Underworld I & II disappeared from GOG.com at EA’s request. Then they returned to the digital storefront earlier this month without much explanation, and are being given away for free for a period of four weeks by way of apology.
Now EA have said they’ll have a “process in place” in future so things like this don’t happen.
