Q: But for now, many of these deals are stuck after the Chinese stock market correction and the suspension of initial public offerings in China. What should they do?
A: They should continue to complete their privatization process. When most of these deals reach completion, the IPO market might have already reopened.
Fundamentally, we are at the beginning of an epic “return” of Chinese companies to its home country for listings.
Q: The consortium proposing Qihoo 360’s US$9 billion privatization deal is rumored to consider cutting their offering price. Do you think the deal will go through?
A: I think it’s highly likely that the deal will complete at a reduced price. The chief executive officer, Zhou Hongyi, is determined to take the company private.
Qihoo is a security company, and it is going through a restructuring seeking to capture more opportunities in the mobile space. So this is not a good time to be a publicly listed company.
Q: The company’s stock is trading at 65% of the offering price of US$76 per American Depository Share (ADS). Do you think the price will be reduced that much?
A: The market may be wrong. The sellers are the existing shareholders, including employees with voting power and also investment funds. It’s not going to be an easy deal, but sellers would definitely not want the price to be cut by too much.
Q: Five days after the announcement of the go-private proposal, Neil Shen, founder of Sequoia Capital China who is also part of the investor consortium, sold US$8 million Qihoo 360 shares for around US$72 per ADS. Doesn’t it seem strange?
A: He might have sold the shares based on his personal needs. But whatever reason, it is his personal action and does not reflect the whole investor consortium.
Going forward, lessons should be learned. You want to make sure that the investor group doesn’t send mixed signals or create doubt to the market.
Q: What other U.S.-listed Chinese companies should consider going private?
A: Many healthcare and hotel companies should consider. Their stocks have little liquidity in the U.S. and less understood by investors in the U.S. For iKang Healthcare Group and Home Inn, it is a good choice for them to go private.
Q: Which Chinese stocks, those that is likely to remain listed in the U.S., do you recommend?