Sina Switch? Privatization Offer Highlights The Lure Of China’s Own Capital Markets

Yesterday’s privatization offer for big China online media Sina from a company controlled by its chairman was made in the wake of Congressional threats to delist U.S.-listed businesses from the country that don’t meet American accounting standards. It also came amid the worst period in overall Sino-U.S. relations in decades.

Serious problems, for sure. Yet the delisting trend goes back longer, and has produced large fortunes for some Chinese entrepreneurs.

An important driver has been higher valuations at home from increasingly well-off investors that often are more familiar with China’s businesses than foreign shareholders are. That’s especially true for media and social media companies. How many of Sina’s non-Chinese-speaking shareholders actually use it? Or any other China-based, U.S.-listed media or social media such as Weibo, Sohu or YY?  

Companies that have seen their valuations rise after relisting at home in recent years include include China Feihe, one of China’s largest powdered milk producers, many of whose assets once traded at the New York Stock Exchange in 2008 under the name American Dairy. Feihe’s Leng Youbin followed Chinese billionaire founders from Focus Media, Qihoo 360, Shenzhen Mindray and Giant Interactive in moving a flagship listing from the U.S. back to a China exchange. Shareholders in New York-listed China online classified site 58.com also received a privatization offer this year from a group led by Warburg Pincus and General Atlantic

Besides valuations, they’re on the move in part because China has made it easier for technology businesses to list, turning Greater China into one of the world’s busiest IPO hubs. That’s a big advance from when Internet pioneers like Sina and Sohu went public in the U.S. two decades ago. The role of private equity and venture capital firms in facilitating that has also increased tremendously.

To be sure, Sina’s Nasdaq-traded shares have sunk with reason. Its profit has declined. This year’s brazen Luckin Coffee scandal underscores why American investors would be crazy not to be concerned about accounting rules and fraud at Chinese companies. No wonder at least some investors yesterday jumped on the possibility to sell Sina at $41 a share; it gained 10.5% in trading on Monday, closing at $40.54. Sina closed at low as $28.88 in March. The preliminary, non-binding privatization offer values the company at $2.7 billion.

The news from Sina, however, also reflects part of a larger gravity tugging at Chinese companies to list on exchanges at home. Though some businesses and entrepreneurs will find good reasons to list abroad, that pull to go public domestically may only intensify in the future.

See related posts:

There’s No Place Like Home: Feihe Moves Listing

Responsibility For Luckin Coffee Fiasco Is Far And Wide

@rflannerychina