Chinese firms re-enter US capital markets

Five China-based companies have filed with the US Securities and Exchange Commission over the past six weeks for approval to list on the country’s stock markets, an indication that Chinese firms may be returning to American markets after scandals prompted a hiatus last year, Reuters reported. AdChina, China Auto Rental, Cloudary Corp, Newsummit Biopharma and Vipshop Holdings have all filed for listing in the US. “The pipeline is strong, as there are a lot of companies that have been waiting for some time for a favorable market to list,” said Alan Seem, Beijing-based capital markets partner at Shearman & Sterling. However, the companies will not using reverse mergers – the practice of buying out listed shell companies that facilitated many scandals surrounding US-listed Chinese firms last year – but rather full initial public offerings, aided by large investment banks and “Big Four” auditors. Many of the filings reported material weaknesses in the companies, suggesting that the firms anticipate tougher SEC questioning.