China Going-Private Targets Extend Selloff on Deal Scrutiny – Bloomberg

U.S.-traded Chinese companies that are seeking to move their listings to the mainland tumbled for a third day as speculation mounted that the Chinese regulator will move to prevent the deals from going through.

The American depositary receipts of Momo Inc., the Chinese dating app, fell 16 percent to $12.27, the most since its initial public offering in 2014. YY Inc. extended a 3-day decline to 22 percent, the most on record since its 2012 debut. Qihoo 360 Technology Co., whose $9.3 billion go-private bid is the biggest among Chinese ADRs. plunged 11 percent. The Bloomberg China-U.S. Equity Index fell 3.6 percent.

The declines came after the nation’s securities regulator signaled Friday that the trend of delisting in the U.S. to sell shares in the mainland at higher valuations would come under greater scrutiny. At local exchanges, companies seen as vehicles for re-listing plunged for a second day on Monday.

“A lot of U.S. investors don’t believe the privatization will occur,” said Brad Gastwirth, San Francisco-based chief executive officer of ABR Investment Strategy, which invests in U.S.-listed Chinese companies. “It’s tough to say all of these deals will go through. But in this environment, people sell first and ask questions later.”

The China Securities Regulatory Commission said on Friday it’s conducting “in-depth” analysis of how companies returning to Chinese exchanges via initial public offerings or mergers and acquisitions would impact the stock market. In a March report, Haitong Securities Co. listed small capitalization and low return-on-equity and debt as among the key criteria for selecting a shell company.