A Study On Chinese Concept Stock With Vie Structure Returning To A-share Market

Variable Interest Entity(VIE),a special kind of protocol control mode which is usually referred to as "Sina Mode",have emerged since the Catalog of Industries for Foreign Investment in China was released in 1990s.Since 2000,VIE structure has played an indispensable role for Chinese enterprises to finance abroad,this structure has also enhanced their business development and improved the degree of internationalization.However,more and more Chinese Concept Stocks began to join in the wave of privatization,because they were suffering from capital market disruption caused by shorting institutions like Muddy Waters Research.2016 is a very important year for Chinese Internet Corporations under the structure of VIE.The Giant Network completed privatization and came back to A-share market,and then followed the QIHOO and SFUN.More and more Chinese concept stocks have decided to dismantle The VIE structure and been willing to come back to domestic market.Based on this background,I take the Giant Network's returning to SME board as an example and study the problems of returning to domestic capital markets for Chinese concept Stocks.Giant Network landed on domestic capital market in the end of 2015.This transaction chose New Century as a shell company,and the whole procedure of privatization and reverse merger were designed very clever and carefully.This case has become a classical acquisition and brought lots of revelation to following returns.In addition,this article has introduced 2 very important concepts,VIE and reverse merger.Currently,reverse merger has become a very common way for companies to go public.It will take shorter time but more cost because of buying shell company.Giant Network's merger with New Century Cruise has just taken several months.After merger,it became a game listing company with a market value over 100 trillion yuan.In this paper,Firstly,I reviewed the related literature why Chinese concept Stocks go public on foreign capital markets and privatize themselves.Then I briefly introduce the course of event that Giant Network removed its VIE structure and listed on A-share market,I also analyzed the reasons,effects and some considerations of removing VIE structure.Finally,I put forward suggestions for listed companies,market regulations and investors respectively according to the above analysis.Giant Network may be a single case,but there is still a similarity.its success can be the theoretical basis and operating example for following companies.Currently a lot of policy guidance has been given to the companies with VIE structure to return.When domestic capital market become more standardized and mature,it can be predicted that more and more Chinese concept stocks will choose to come back and many domestic enterprises can also go international through overseas financing.