Research On The Motivation And Economic Effect Of Chinese Concept Stock Returning To Hong Kong Stock Secondary Listing

It used to be that listing conditions in overseas capital markets were looser,and the Internet enterprises of our country waging overseas listing.In recent years,China concept stock frequently suffered from overseas short-selling institutions,so there began to be China concept stock enterprises choose to return.Later,when the trade war broke out between China and the United States,China Concept stocks faced a more severe external situation,so a large number of China concept stocks set foot on the road to return.In 2018,HKEX revised its listing rules to provide a new path for the return of Chinese concept stocks.Secondary listing in Hong Kong has gradually become a popular choice for Internet companies to return.Based on this background,this paper takes Baidu as an example to study the motivation and economic effect of China Concept stock’s secondary listing in Hong Kong.We firstly combs the relevant theories and literature of Chinese concept stock regression,then introduces Baidu’s general situation and the process of two listing,and then analyzes the external and internal motivations of Baidu’s secondary listing in Hong Kong,and compares the existing regression paths to explain why Baidu chooses the way of secondary listing in Hong Kong for regression.In addition,this paper analyzes the economic consequences of Baidu’s secondary listing from the aspects of stock subscription,stock price performance,financing effect and market valuation.Finally,suggestions are put forward for policy makers,Chinese stocks and investors.The main conclusions of this paper are as follows:(1)There are both external and internal motivations for Baidu to choose a secondary listing in Hong Kong.From the perspective of external environment,the cross-border audit conflict between China and the United States leads to the delisting risk of Baidu or violation of regulations;the trade sanctions against China by the United States have a negative impact on Baidu’s business performance and financial position;the mature development of Chinese Hong Kong’s capital market;the reform of HKEX provides convenience for Baidu’s return.From the internal perspective,on the one hand,Baidu has a high financing demand.Baidu needs a large amount of funds in research and development,investment and operation,and its main business is faced with profit risks.It bears great pressure of debt repayment.Baidu,on the other hand,has a need to raise corporate valuations.In terms of the choice of regression path,we find that secondary listing in Hong Kong is a more suitable regression way for Baidu by comparing several existing regression paths.(2)The economic effect of Baidu’s return did not meet expectations.From the point of view of share subscription,Hong Kong investors on Baidu enthusiasm is very high.However,Baidu gave a vague description of the earnings results of its core business without detailed financial data,which led to a lack of market confidence in Baidu and a large risk of short selling before Baidu’s secondary listing in Hong Kong,which ultimately resulted in a negative attitude of the market at the time of Baidu’s secondary listing.From the point of view of stock price performance,the US stock market has a relatively negative market reaction to Baidu’s secondary listing.From the perspective of financing effect,Baidu’s profit is facing a severe condition,and the overall profitability shows a downward trend.Baidu’s accounts receivable have increased significantly due to its business model and the impact of the COVID-19 pandemic.A secondary listing would only improve Baidu’s solvency to a limited extent.The sharp changes in the growth indicators reflect the evolution of Baidu’s business.Baidu’s active users grew.Some of Baidu’s businesses have made breakthroughs,but the overall realization of potential businesses is insufficient and their revenue contribution is small.From the perspective of market valuation,during Baidu’s secondary listing in Chinese Hong Kong,the price-earnings ratio of the US stock market not only did not recover,but decreased,indicating that Baidu failed to achieve its expected target.The research significance of this paper is as follows:At present,scholars’ research on the regression mode of Chinese concept shares mainly focuses on:delisting before backdoor return to A-share listing,privatization after delisting before A-share IPO,and spin-off after delisting.Hong Kong secondary listing is different from the above regression model.A secondary listing in Chinese Hong Kong would not require a delisting from the US stock market or dismantling the VIE structure,and could retain the dual-class share structure.Secondary listing is a new way of return after the restructuring of HKEX.At present,there are relatively few studies on secondary listing in Hong Kong.Existing researches mainly focus on Alibaba Group,which returned to Hong Kong in this way,and pay less attention to other companies that subsequently went to Hong Kong for secondary listing.Therefore,there is still some room for research.Different from Alibaba,Baidu has insufficient information disclosure and weak anti-risk ability,and the secondary listing market reacts negatively.Therefore,this paper takes Baidu Group’s secondary listing in Hong Kong as an example to analyze the motivation and economic consequences of its regression,which enriches the research on the regression of China concept stocks.In addition,through the study of Baidu’s secondary listing,we can clarify the advantages and disadvantages of the secondary listing in Hong Kong,and provide reference for other decision makers of the proposed return of Chinese concept stock,securities market policy makers and investors.