Gregory Puff Speaks with Caixin on Delisting of Chinese Companies
Chinese-language finance publication Caixin interviewed Akin Gump Asia practice head Gregory Puff on the topic of Chinese company delisting and going-private deals.
Puff, who has led Akin Gump teams in numerous such transactions, said that it is not a bad thing that many Chinese companies are delisted through going-private deals—it can assure those Chinese companies considering U.S. listing that, even if the listing is ultimately unsuccessful, they still have this last resort, which may help them to make up their mind.
He noted that the reasons for delisting of Chinese companies include: (i) lack of liquidity in the U.S. market; (ii) high costs for listing in the U.S., including the cost for listing itself and that for the post-listing period, including legal and audit expenses; and (iii) for Chinese companies listed in the U.S., there always exist other options, such as listing in Shanghai or Hong Kong.
He added, “While it is a good thing to get listed in the U.S. market, which might be beneficial for the development of the company during a certain period, these companies still consider domestic listing as a practical alternative, and many of them are starting to doubt whether the United States is the right choice.”
Puff said that many companies are already considering this option: "This is a practical issue—listing in Hong Kong or Shanghai can provide easy access to the Chinese market, investors and consumers, and the Chinese companies may feel more comfortable in the Asian market than the U.S. market,"
This trend towards delisting notwithstanding, Puff believes that many Chinese companies are still willing to get listed in the U.S. market, stating “For some companies, even they are successfully listed in the U.S., they still want to undertake a going-private transaction as a way to secure themselves against potential failure in the U.S. market.”
For these companies, he suggests they pay more attention to improving the health of their financial status, the profitability of their business activities and their transparency in corporate behavior, which, he believes, are more important than the costs for listing and legal risks.