m******e
发帖数: 536 | 1 昨天晚上睡觉前在彭博新闻上看到的。大概是这些中概股产权结构都有点问题，现在美
国和香港的证监会都要进一步调查，其实这个消息前段时间都在传。
Baidu Forced to Add Warnings as Regulators Focus on China Stocks
By Shai Oster and Dune Lawrence Dec 15, 2013 5:27 PM ET
U.S. and Hong Kong stock market regulators are demanding that Chinese
companies provide investors more warnings about the risks of a legal
structure commonly used to list those shares overseas.
The scrutiny follows some little noticed legal developments in China over
the past 18 months that show the contracts behind the foreign listings may
not hold up in court. It also casts a spotlight on the risks inherent in
some of the world’s most sought-after investments just as Alibaba Group
Holding Ltd. prepares for what could be the biggest foreign listing of a
Chinese Internet company.
The U.S. Securities and Exchange Commission has pressed Beijing-based Baidu
Inc. (BIDU), China’s No. 1 search engine, to make additional disclosures
about its corporate structure, citing the potential for foreign owners to
lose control.
Separately, the Hong Kong Stock Exchange added a requirement last month for
companies that seek to list using the structure to obtain a legal opinion
stating that their contracts don’t break rules or laws, and won’t be
invalidated.
At issue are “variable interest entities,” or VIEs, which are used to
circumvent the Chinese government’s restriction on foreign ownership of key
industries. The VIEs give overseas investors both the economic gains and
losses of the business through contracts rather than direct ownership. About
half the Chinese firms listed in the U.S. use the structure, and Internet
and financial companies are among those that have virtually no other way to
comply with Chinese law.
Photographer: Tomohiro Ohsumi/Bloomberg
Signage is displayed outside the Baidu Inc. headquarters in Beijing.
Increased Scrutiny
Investors such as Gary Black, global co-Chief Investment Officer for Calamos
Investments, said they have grown more cautious about such stocks.
“We continue to invest in VIEs selectively where there is a high return
opportunity, where we’ve done our homework, and where we feel confident
about management,” said Black, whose firm manages $27.8 billion in
Naperville, Illinois. “Our level of scrutiny has increased. For example, we
recently sent three members of our global investment team to China, where
they met with several managements with VIEs we were considering.”
Even investors with a clear sense of the risks are in a bind, said Arthur
Kroeber, Beijing-based managing director of GaveKal Dragonomics, who advises
mutual funds and hedge fund managers on investing in China.
“On the one hand the structure is obviously risky, but on the other hand
the best-performing stocks in the world this year have been the Chinese
Internet stocks, all of which are VIEs,” Kroeber said. “So if you invest
in them you take on more risk than you’d like, but if you don’t invest in
them your returns will fall well short of your benchmark. Plus, investors
are looking for ways to play the ‘rising Chinese consumer,’ and Internet
stocks are really the only way to do it.”
Photographer: Nelson Ching/Bloomberg
Employees work at Alibaba Group Holding Ltd.’s headquarters in Hangzhou,
China.
Due Diligence
The CSI Overseas China Internet Index has gained 76 percent this year,
compared with a 24 percent return in the Standard & Poor’s 500 index. That
performance is helping fuel a wave of offerings from Chinese companies to
attract foreign investors, many of whom may not realize they are buying
something other than a direct stake in the operation.
Among the most anticipated is Alibaba, which is considering a listing in New
York and Hong Kong and says it doesn’t anticipate any problem meeting
exchange requirements. Investors’ appetite for that deal won’t be damped
by concerns over the structure, said Jim Oberweis, co-manager of the $188
million China Opportunities Fund, adding that an Alibaba listing would be
the offering of the year.
Supreme Court Ruling
In two letters in June and August, the SEC pressed Baidu to discuss the
impact of recent People’s Republic of China court and arbitration rulings
on its business and its formal or informal talks with the Chinese government
about the structure. The company was also asked to specify who owns its
various VIEs.
The SEC’s initial letter, dated June 18, makes reference to two cases. In
the first, China’s Supreme Court in October 2012 invalidated similar
contracts meant to give control over a mainland holding company and an
effective stake in Minsheng Banking Corp. to a foreign company, Hong Kong-
based Chinachem Financial Services. The court ruled that the setup was
improperly circumventing the law, saying it amounted to “concealing illegal
intentions with a lawful form.”
In the other case, Shanghai’s arbitration board invalidated VIE agreements
for an online gaming company over the same issue of “concealing illegal
intentions with a lawful form,” according to Baidu’s response to the SEC
dated July 2.
In its letter, Baidu said that Chinachem’s VIE structure was different and
that neither the court ruling nor the arbitration panel’s decision created
binding precedent under Chinese law.
Added Disclosure
After the second letter from the SEC in August, Baidu agreed to change its
disclosure and add that it could lose control over the assets in its VIEs,
including the right to use the well-known name baidu.com. The result would
be a material adverse impact on its earnings and reputation, Baidu said.
Baidu continues to emphasize its strong management and distance itself from
the cases identified by the SEC.
“The investment community has become more discerning,” Kaiser Kuo, Baidu’
s director of international communications, said in an interview. “They
understand there are good, well-structured companies and there are ones
where risks are greater.”
Institutional investors have also tended to make distinctions between small
Chinese companies and big ones with demonstrable businesses and a global
reach.
‘Comfortable’ With VIE
Alibaba hasn’t chosen a venue or a timetable for a foreign listing, said
John Spelich, vice president of international corporate affairs.
“We are comfortable that our VIE structures are and will be compliant with
all relevant requirements for a listing in the U.S., H.K. or elsewhere,” he
said.
For its new requirement, the Hong Kong Stock Exchange echoes some of the
same language used in Baidu’s correspondence with U.S. regulators.
Companies need a legal opinion stating that the VIE setup isn’t “
concealing illegal intentions with a lawful form” and won’t be deemed
invalid.
Concerns about VIEs erupted in 2011, when Alibaba transferred its online-
payment business, Alipay, to a company controlled by Alibaba founder,
billionaire Jack Ma. At the time, Yahoo! Inc. (YHOO) had a 40 percent stake
in Alibaba, which in turn had a VIE relationship with Alipay. Alibaba said
it made the transfer to comply with restrictions on foreign ownership of
payment services. Yahoo’s shares tanked on the lost value.
Yahoo Deal
In May 2012, Alibaba agreed to pay $7.1 billion for half of Yahoo’s stake.
Under the deal, Alibaba will need to either buy back a quarter of Yahoo’s
current stake or let Yahoo sell the shares at the time of an IPO. That
settlement could be completed with an overseas listing by Alibaba.
Though Sunnyvale, California-based Yahoo and its investors are being
compensated by Alibaba, other foreign investors have suffered losses in
companies with the VIE structure.
In September, the SEC accused the former chairman and chief executive of
ChinaCast Education Corp. (CAST) of stealing $41 million from investors. The
SEC said the executive, Chan Tze Ngon, transferred almost all the money
raised from the company’s IPO to a subsidiary he secretly controlled. The
market value of the Hong Kong-based company plunged to less than $5 million
after Chan’s and a former president’s misconduct was disclosed by the new
management, from more than $200 million, the SEC said.
FAB Universal
FAB Universal Corp. (FU), a media distribution company listed on the New
York Stock Exchange, was halted Nov. 22 after the stock dropped 42 percent
in four days following allegations it defrauded investors. Faruqi & Faruqi
and at least three other law firms have filed suit seeking class-action
status, after short sellers said that FAB inflated sales figures and that
its VIE had secretly issued 100 million yuan ($16.5 million) in bonds.
A preliminary internal review uncovered “certain deficiencies” in internal
controls, FAB said in a Dec. 10 statement in response to the allegations.
One of FAB’s VIEs conducted a $16.3 million bond offering in China that
wasn’t reflected in the financials, the company said, adding that it was
planning to restate its financial statements for the second and third
quarters of this year.
ChinaEdu Corp. (CEDU), a Beijing-based online education provider listed on
Nasdaq, said on Oct. 17 that 28 percent of its VIE was frozen as part of a
dispute over a loan with its nominee shareholder. The company said in a
statement it doesn’t think the freeze will affect its operations.
“VIEs are doomed,” said Paul Gillis, a professor of accounting at the
Guanghua School of Management at Peking University. “They work until you
need them to work and then they won’t at any point you need to enforce the
agreement because you can’t. There’s no evidence of anyone successfully
enforcing a VIE.”
‘Sina Structure’
The Chinese courts have only recently begun to address the legality of VIEs
-- also known as the “Sina structure” after Shanghai-based Internet portal
Sina Corp. pioneered the tactic for a U.S. share offering in 2000. One of
the earliest references by Chinese regulators to the structure was in an
August 2012 decision by the Ministry of Commerce barring Wal-Mart Stores Inc
. (WMT) from controlling value-added telecommunications services of online
retailer Yihoadian through a VIE.
While remaining on the lookout for more court guidance on the corporate
structure, investors such as Oberweis, the China Opportunities Fund (OBCHX)
co-manager, continue to play down the concerns raised by Gillis.
“It’s part of investing in China,” Oberweis said. “You’re kind of stuck
with it.” |
|
