Research On The Motivation And Path Of The Privatization Of The China Concept Stocks

Due to the high threshold of listing in the Chinese capital market,many private enterprises in emerging industries have to choose to go public in the US in order to obtain financing in the short term.However,with the booming development of Chinese capital market and the maturity of the trading mechanism in recent years,coupled with the poor performance of the China concept stocks,these Chinese companies listed in the US have begun to choose privatization to leave the US capital market,and a large part of them are also planned to re-list in the domestic capital market.Firstly,from the theoretical point of view,this paper introduces the history of the development of the China concept stocks and the overseas listing structure,and analyses the motivation and path of the privatization and re-listing of the China concept stocks.It is concluded that the motivations of the privatization and return of the China concept stocks are: undervalued,the favorable conditions of the domestic policy environment,the low liquidity brought about by information risks,the “dissatisfaction” caused by cultural differences,and the high cost of maintaining the listing status.The return path is divided into the privatization stage and the re-listing stage.The privatization stage includes share purchase,business combination,stock merger and asset sale.The re-listing stage includes direct IPO,backdoor listing,listed on the NEEQ and spin-off.Then,this paper takes the China concept stocks that have been announced privatized between 2011 and 2018 as the main research samples,and conducts empirical research on the factors affecting the privatization,return to the domestic capital market and privatization premium.The results show that :(1)corporate transaction costs,equity concentration,cash holdings and potential profitability are the important motivations of the privatization of the China concept stocks;(2)The size of assets,profitability,domestic and international market environment differences are the key factors in determining whether the stocks will return successfully;(3)The privatization premium level of the China concept stocks mainly depends on the size of the assets and the degree of undervalued value.Finally,this paper selects Wu Xi App Tec as a research case and analyzes the motivations and path of its privatization.It finds that the motivations for the return of Wu Xi App Tec are: strategic restructuring,favorable domestic policy environment and undervalued in overseas capital market.Wu Xi App Tec is the first China concept stock which successfully return to the domestic capital market in the form of direct IPO in the context of the national support for the "four new economy" industry unicorns.It is also the third "A+H" pharmaceutical company which listed on the dual capital platform after the Shanghai Pharmaceutical and Fosun Pharma.The innovation of “Wu Xi App Tec Path” is that it expands the financing channel through the spin-off,the centralized comparative advantage to develop the main business,the demolition of VIE structure,and raise funds by discounting in the A-share market have accelerated the return process,which will provide reference for other Chinese companies that are preparing to return to A-share market.