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China Companies Flee U.S. Exchanges

At least sixteen Chinese companies have de-listed from U.S. stock exchanges in the last two years and three more are known to be in buy-out discussions, according to Kevin LaCroix of the D&O Diary.

Citing a U.K. law firm memo, he said last week as many as fifty additional Chinese companies are ‘presently considering, or actively seeking, de-listing.’

What’s driving them away? Litigation risks. About sixty of the three hundred or so U.S.-listed Chinese companies have already been targeted by class actions and shareholder suits.

For many of them, the rush for a U.S. listing was a big mistake that couldn’t end well. (See, for example, How a Chinese cave got listed on a U.S. stock market, from Reuters.) Many local owners and managers never understood U.S. compliance, accounting, and disclosure rules. And a few of the companies that listed were outright frauds, exposed by short-sellers like Muddy Waters Research

Let’s hope the fiasco (in which some U.S. lawyers, auditors, bankers, and ‘consultants’ were complicit) won’t permanently damage the idea that best-practice compliance can someday work for Chinese companies.

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