Qihoo 360, CSRC speak out on backdoor listings

The software security developer said in a statement that it was aware of "certain rumors circulating in the past two days concerning its proposed privatization. Qihoo 360 understands that these rumors are untrue."

This follows local media reports that the China Securities Regulatory Commission (CSRC) required Qihoo's major shareholders - including institutional investors as well as employees - to be subject to a six-year lock-up period once the backdoor listing is completed. It is also said that Qihoo will not be able to raise capital from the secondary market to finance acquisitions. Qihoo refused to accept these requirements, the reports added.

Qihoo received a take-private offer from its chairman and CEO, plus CITIC Securities, China Renaissance, Golden Brick Capital and Sequoia Capital, in June of last year. In December, a string of other investors, including several domestic insurance companies, came in to support the deal, which received shareholder approval in March. It will be the largest PE-backed privatization of a US-listed Chinese company.

Qihoo is said to be seeking a shell company to re-list on the A-share market. However, other reports claimed that regulators had suspended domestic listings by companies that have been taken private in the US.

In response to this, Xiaojun Zhang, a CSRC spokesman, told a news conference that regulators are studying the potential market impact of overseas-listed Chinese companies relisting on the A-share markets through IPOs, M&A as well as restructurings. Over the past three years, five companies have been delisted from the US and re-listed in China via asset restructurings.

The valuation gap between the domestic and overseas markets and speculation on the shell company price warrants attention, Zhang said.

A handful of US-listed Chinese firms considered delisting from the US with a view to re-listing domestically at higher valuations. A reverse merger - which involves injecting assets into listed shell companies - represents a short-cut route as it avoids the long approval process for IPOs.  

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• Topics
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