From China to Wall Street and back

The recent spate of negative publicity combined with depressed stock prices of China-based companies publicly traded in the United States have led a number of these companies to consider going private. In 2011, several of these companies, including Funtalk China Holdings and Chemspec International, have completed going-private transactions and others are in the process of going private or are considering whether to go private. Many of these companies are US-incorporated companies that became public companies through reverse takeovers (RTOs), while others are foreign private issuers, which had accessed the US equity markets through traditional US initial public offerings (IPOs) involving a capital raising and a listing on the New York Stock Exchange (NYSE), Nasdaq or the American Stock Exchange (Amex). So long as market sentiment in the United States remains negative towards China-based companies and valuations are low, China-based companies subject to US Securities and Exchange Commission (SEC) reporting obligations can be expected to continue assessing whether the benefits of being publicly traded in the United States outweigh the costs associated with increased scrutiny and regulation.