Several Chinese companies are withdrawing from the U.S. stock market with loans financed by China Development Bank (CDB).
In a Washington Post report, “Focus Media Holding Ltd., announced its chairman and private equity firms want to buy back its U.S.-traded shares and take the Shanghai-based advertising company private. The deal would value Focus Media at $3.5 billion, according to financial information firm Dealogic.”
The article cites several companies moving to domestic exchanges with the help of $1 billion in loans from CDB.
Another U.S.-traded company, Fushi Copperweld Inc., announced plans in June by its chairman, Li Fu, and a Hong Kong firm, Abax Global Capital, to take the maker of metallic conductors private.
Also in June, China TransInfo Technology Corp., a provider of traffic management technology, announced privatization plans to be financed by CDB’s Hong Kong branch. A company spokeswoman said she could not comment because the plan is not finalized.
In October, Harbin Pacific Electric Co. withdrew from Nasdaq in a share buyback financed by $400 million in loans from the CDB.
Is there something they know that we don't? Considering the current economic problems of the U.S. and talk of another recession, one has to wonder if they're abandoning ship.
There are reasons given that have nothing to due with the economic crisis facing America. But the ones listed by the Chinese for pulling out of U.S. markets differ altogether from what the U.S. has to say.
Focus Media “has been seriously undervalued on U.S. stock markets” and being taken private will help to promote its “long-term strategic development,” said a company spokeswoman, Lu Jing.
However, some disagree. There have been some reports of accounting discrepancies found on auditing and losses of several billion dollars after falling share prices. Beijing issued a requirement in May for Chinese citizens to head their major accounting offices.
Chinese and U.S. regulators are at a standstill over whether American inspectors will be allowed to review the China-based audit firms.
Washington wants auditors to hand over documentation on companies that are under investigation but Chinese authorities have barred the release of some information. If a settlement is not reached, the SEC could reject audits by China-based firms, forcing companies to find new auditors.
“Probably all these companies have some questionable accounting, so they may prefer to move out of the U.S., not to come under too much scrutiny,” said Marc Faber, managing director of Hong Kong fund management company Marc Faber Ltd.
Information on Chinese companies, how business is conducted in China and their worth is provided by research companies. Muddy Waters Research is one of them.
Muddy Waters cited Fushi Copperweld in April as one of several companies it said dealt with an investment bank that helped enterprises seeking U.S. stock market listings to conceal problems and misrepresent financial information.
Fushi Copperweld fired back on their website, "Fushi Copperweld has reviewed the report and categorically denies all of its claims, which are vague and non-specific, and were made in the absence of any discussion with the Company."
The stock exchanges in China are in Shanghai and Shenzhen, with the latter mimicking the Nasdaq for smaller companies.
Time will tell how this will effect the U.S. economy and how many Chinese companies will pack up their money and go home. However, if many more follow suit, the U.S. can’t continue to use auditing irregularities as an excuse.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com