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Why Chinese listed companies withdraw from US market? (2)

(People's Daily Online)

15:57, June 26, 2012

The U.S. capital market has too strict requirement on the short-term profit of companies, which is not conducive to the implementation of long-term strategy.

The privatization can better promote the development strategy of the companies, which is also an important reason for withdrawing from the stock market. The withdrawing of Alibaba.com Limited, to a large extent, is the result of restructuring the company business and promoting the overall listing.

Gu Hong, business supervisor of the merger and acquisition in the JPMorgan Chase in the Greater China region who was in charge of delisting transaction of Shanda, said that the Shanda voluntarily withdrew from the U.S. stock market. Shanda hopes to develop into a diversified network media giant but this ambition was delayed by a series of listed plans in the United States.

Since 2009, the Shanda had taken over the Hurray Digital Media and Ku6.com, demerged the Shanda Games and tried to list Shanda on the market, hoping to build an entertainment empire. However, after the stock price of Shanda peaked at 63 U.S. dollars per share in the second quarter of 2009, it began drop all the way.

This brought decline in profitability of the Shanda. The stock price of a listed company depends on the profitability of the company. However, the newly listed companies of Shanda have a limited profitability in the business incubation period, which is bound to influence the performance of Shanda. The capital market is cruel and has special requirements to the short-term performance of listed companies. Therefore, the listed companies have to pursue the short-term performance to meet the requirements, which will impede the strategy arrangement, and affect the cultivation of new businesses.

"Judging from this perspective, in order to go further, Shanda must get rid of the short-term performance requirements and free up time and efforts to win more space for the cultivation and arrangement of new businesses," Gu Hong said.

Read the Chinese version at: 从美国退市 企业学到了啥, Source: People's Daily, Author: Yuan Quan and Xie Weiqun

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