Chinese ADR Buyouts in Progress (Update)

Stabilization of the Chinese domestic markets has improved prospects for completion of a majority of the ADR buyouts announced this year.  In the past week shareholders approved the buyout of Shanda Games (GAME) and the buyout was Sungy Mobile (GOMO) was approved and closed.

The CSI 300 market cap weighted index of the 300 largest Shanghai/Shenzhen listed stocks has rebounded 26% from its August low and is now +8% for the year:

CSI300 Chart 111815

The highly speculative Chinext index has rebounded 50% from its September low and is now up 73% for the year.

Chinext Chart 111815

The lagging performance of many US listed Chinese stocks leaves the incentive in place for privatization restructuring and relisting on a domestic exchange.  Market volatility did not stop completion of several deals in recent months (e.g. PWRD and CMGE).  A majority of the transactions on this list are likely to close, although some could have their prices reduced (as happened with E-House):

ADR Buyouts 111815

As an alternative to privatization, some companies are finding ways to list their Chinese operating businesses on local exchanges so that the benefits of the higher valuations available there can be delivered to current shareholders.

 

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