Chinese man walks past a TV advertising screen by Focus Media Holding Ltd. on
display near an apartment lift in Beijing Tuesday, Aug. 14, 2012. Just a few
years after Chinese companies lined up to sell shares on Wall Street, a growing
number are reversing course and pulling out of U.S. exchanges. This week, 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. (AP Photo/Andy
(AP) -- Just a few years after Chinese companies lined up to sell shares on Wall
Street, a growing number are reversing course and pulling out of U.S.
week, 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.
companies also are withdrawing from U.S. exchanges. In a sign of official
encouragement, a Chinese business magazine said a state bank has provided $1
billion in loans to help companies with listings abroad move them to domestic
withdrawals follow accusations of improper accounting by some companies and a
deadlock between Beijing and Washington over whether U.S. regulators can oversee
their China-based auditors.
Chinese companies say they are pulling out of U.S. markets because a low share
price fails to reflect the strength of their business. Withdrawing also
eliminates the cost of complying with American financial reporting rules.
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.
company, formed in 2003, operates electronic advertising displays in elevators,
grocery stores and other locations.
haven't considered whether to list the company on Chinese markets but that
possibility has not been excluded," Lu said.
Chinese companies faced scrutiny after auditors for several quit and others were
accused of accounting irregularities. Concerns about company finances have
caused share prices to tumble, costing investors several billion dollars.
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.
financial firm, Muddy Waters Research, accused Focus Media last year of
overstating the number of its display panels and questioned acquisitions
reported by the company. Focus Media denied the allegations and said independent
auditors confirmed the size of its network.
week, Muddy Waters founder Carson Block said in a statement: "The markets are
far better off if a few deep pocketed investors own Focus Media instead of
mutual funds and other public shareholders."
group proposing to take the company private includes its chairman, Jason Nanchun
Jiang, and private equity firms Carlyle Group, CITIC Capital Partners, CDH
Investments and China Everbright Ltd.
status of Chinese companies in the United States could be complicated by a
dispute between U.S. and Chinese regulators over whether American inspectors
will be allowed to examine the work of their China-based audit firms.
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.
May, Beijing took steps to tighten control of local affiliates of major
accounting firms by issuing a requirement for Chinese citizens to head those
of Chinese companies issued shares on Wall Street over the past decade, raising
billions of dollars from investors who wanted a stake in the country's booming
were private companies that could not raise money on Chinese exchanges that were
created to finance state industry or wanted the higher public profile.
regulators encouraged the move as a way for entrepreneurs to raise money and
speed the development of China's economy. But in recent years Beijing has
encouraged private companies to issue shares in China to help develop its
markets and give Chinese households better investment options.
have made it easier for private companies to join China's two exchanges in
Shanghai and the southern city of Shenzhen, though most listings still are for
state enterprises. The Shenzhen exchange created a second board for small
companies, imitating the U.S.-based Nasdaq market.
state companies such as oil giant PetroChina Ltd. and China Mobile Ltd., the
world's biggest phone company by subscribers, also have issued shares abroad.
None has indicated it plans to withdraw from foreign stock exchanges.
economics also are shifting in China's favor.
companies saw share prices plunge following the 2008 global crisis, while
economic growth at home, even after a recent decline, is still forecast at about
8 percent this year. Rising Chinese incomes are creating a bigger pool of money
speaking, a company's shares are sold at a higher premium in initial public
offerings on Chinese stock markets than on U.S. markets," said Mao Sheng, a
market strategist for Huaxi Securities in the western city of Chengdu.
he said, "If the company's business is mainly in China, it will be good for its
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.
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.
Copperweld denied Muddy Waters' "vague and nonspecific" claims.
company said its privatization will be financed with loans from the China
to support construction of highways and other public works in China, CDB plays a
growing role in its corporate expansion abroad. The bank provides credit to
buyers of Chinese telecoms gear and other big-ticket goods and has financed
building projects in Africa, Latin America and Asia.
has lent $1 billion "to help Chinese public companies leave the U.S. stock
market to return to domestic markets," the business magazine Caixin said last
who answered the phone at Fushi Copperweld said no one was available to
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
October, Harbin Pacific Electric Co. withdrew from Nasdaq in a share buyback
financed by $400 million in loans from the CDB.
Press researchers Fu Ting in Shanghai and Yu Bing in Beijing contributed to this