Around one-fifth of Chinese companies currently listed in the US may not qualify for the Hong Kong exchange, according to a report by CMB Wing Lung Bank, which could spell trouble due to the ongoing audit dispute.
52 out of the 261 Chinese firms listed in the US currently do not qualify to go public in Hong Kong, according to an «SCMP» report citing data from CMB Wing Lung Bank’s equity research team. The research was based on existing threshold requirements for listings, including market capitalization, revenue, net profit and operating cash flow.
A spokesperson for the bank said the research has not been verified and was not authorized for publication.
Delisting Capital
According to the report, the 52 firms face «lingering uncertainty» due to an unknown deadline for delisting, which will add further financial pressure.
«If they have to delist, they will have extra demand for capital to buy back the shares from smaller shareholders, causing problems to both their operations and financial situation,» CMB Wing Lung Bank said.
Audit Dispute
Meanwhile, US and Chinese regulators continue negotiations to reach an agreement with the hopes of preventing mass delistings.
While Securities and Exchange Commission chair Gary Gensler said there was «good faith» in the talks, he was also «not particularly confident» an agreement could be reached. More recently, Public Company Accounting Oversight Board chair Erica Williams reiterated that full compliance would be required with «no loopholes, no exceptions».
According to data from consultancy firm Kroll, around 170 Chinese companies had delisted from the US, as of May 2022, with 47 percent opting for privatization. Of the delistings, 25 percent were due to accounting fraud or bankruptcy and around 10 percent were driven by political considerations.
In addition to Hong Kong, Beijing has been creating other alternatives for listing via stock links with other markets like London and Zurich.
