Chinese companies want to escape from New York

escape-from-new-york-02Start spreading the news, the Chinese are leaving today, they don’t want a part of it –New York, New York.

Chinese tech firms are looking to drop their listings in New York and head back home where they have higher share valuations and the Stock Market never sleeps.

Their mind-set is also helped by the fact Beijing is going to formally outlaw foreign shareholder control of firms in protected tech sectors.

While you would think the US would be happy to see the back of them. After all, the US politicians have been spitting bile at them for ages, claiming against all evidence, that they are spying on the US.

However an exodus of Chinese tech firms would spell the end of a profitable line of business for Wall Street underwriters. Last year, the $25 billion IPO of e-commerce giant Alibaba – the world’s largest initial public offering ever – generated more than $300 million in fees.

However the US really has nothing to offer. Firms listed on the Nasdaq index get an average share price equal to 11 times their earnings. On ChiNext, they get 133 times.

Yesterday, Chinese Premier Li Keqiang encouraged more of such companies to return, particularly those with “special ownership structures,” referring to the contractual loopholes employed by many Chinese firms to evade restrictions on foreign ownership.

China is lining up the finances to assist the repatriation. Investment bank China Renaissance has teamed up with Citic Securities to raise funds to help delist and underwrite new listings in China, while Shengjing Management Consulting has launched a fund-of-funds that intends to repatriate about 100 Chinese firms.