Chinese initial public offerings (IPO) were once tipped as a huge opportunity for Western investors. However, after a number of offshore stock scandals and fraud allegations, reports reveal that investors are steering clear of Chinese IPOs.
In the Financial Times today, a report showed that:
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Chinese companies with a combined equity value of $3.5 billion were taken private in 2011 by management, strategic buyers and private equity groups, according to data compiled by Roth Capital Partners, a California-based advisory firm. A further $4.3 billion of potential deals remain in progress. In 2010, almost no such deals were completed, according to Roth.
In contrast, Chinese companies raised only $2.2 billion through IPOs, about half what they raised in 2010, according to Dealogic and Thomson Reuters. No Chinese companies made it to market in the fourth quarter. According to Dealogic, $41.9 billion was raised in total on US exchanges last year, down from $44.5 billion in 2010.
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The data revealed in the story is not surprising, given the level of scandal that sector has become embroiled in.
In the December issue of Euromoney magazine, we highlighted the "glitch and glamour of Chinese IPOs":
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The allure of public listings has been tarnished by offshore scandals while banks are tightening their lending, forcing CEOs of China’s most dynamic companies to look to new funding sources. Is the offshore IPO market dead?
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And for more on Euromoney's coverage of the Chinese IPO and equities, check out the following stories:
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What’s behind the great China stock scandals?
The fall of the multi-billion dollar Sino-Forest Corporation is merely the most prominent show in the overseas-listed China stock scandal circus, as a colourful cast of auditors, corporate executives, exchanges, investors, regulators and short sellers argue over who’s to blame and what can be done about the alleged frauds and misdeeds now coming to light. Lawrence White follows a saga that takes in Hong Kong, New York and Shanghai.
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Equities: Litigation boom as China stock scandals roll on
CEOs can be forced to testify; accused companies face difficulties in counter-suing
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Chinese equities: When being accused means you lose
Focus Media’s plight shows how quickly a short report can smash a company.
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The case against Sino-Forest
The accusations made by Muddy Waters in its original and subsequent reports on Sino-Forest (also known by its stock ticker TRE) are too detailed and extensive to be reproduced here; interested readers should seek out the research, which is freely available on the Muddy Waters website.
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China special focus
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- Euromoney Skew Blog
