Weibo drops 7% on its first day of listing in Hong Kong, casting a shadow on China’s concept stocks “returning to Hong Kong”-BBC News

Weibo was originally the name of a product form, which was benchmarked against Twitter in the United States. In August 2009, Sina Weibo was launched. At that time, there were also Tencent Weibo, NetEase Weibo, Sohu Weibo, etc. on the Chinese Internet, competing on the Weibo product track.

Sina Weibo gradually came to the fore and successfully went public in the United States in April 2014, which also announced the end of this race, and other giants closed their own Weibo products one after another. “Weibo” has also become a special reference for Sina Weibo.

Four years after Weibo’s listing on the US stocks, its valuation reached its peak. In February 2018, the stock price reached US$142, with a valuation of US$32 billion. After more than three years, it fluctuated and fell, and it has been cut in half at present, hovering at 76 US dollars.

At the capital level, Weibo faces the dilemma of small revenue. Compared with emerging social media platforms such as Kuaishou and Douyin, Weibo has about the same number of users, but only a fraction of its revenue.

Weibo also faces considerable regulatory pressure.

According to an announcement submitted by Weibo to the US securities regulator in April last year, a state-owned entity acquired 1% of Weibo’s shares and has the right to appoint a director.

This regulatory model was first proposed at the Third Plenary Session of the Eighteenth Central Committee of the Communist Party of China in November 2013. In February 2014, the second meeting of the Central Comprehensive Deepening Reform Leading Group headed by the leader of the Communist Party of China Xi Jinping deliberated and approved the “Implementation Plan for Deepening Cultural System Reform”, and listed the pilot of the “special management unit system” in media companies as 2014 Essentials of work.

The “Internet News Information Service Management Regulations” that came into effect on June 1, 2017 stipulate that qualified Internet news information service providers implement a special management unit system, and the specific implementation measures will be separately formulated by the National Internet Information Office.

In addition, its prospectus shows that the major shareholders behind Weibo are Sina Corporation (holding 44.4%) and Alibaba (holding 29.6%).

Because of this relationship, Alibaba’s influence on Weibo has been criticized by Chinese Internet public opinion.

In July of this year, Alibaba female employees reported that “male boss was sexually assaulted and sheltered.” Alibaba, which was involved in the whirlpool of public opinion, was criticized by public opinion for its countermeasures such as “deleting posts on Weibo” and “deleting hot searches on Weibo”. .

People’s Daily’s public account “Talang Youth” commented that “the slow eruption of public opinion has caused the public to doubt whether Ali has carried out public relations operations”; “The state’s attitude has been very clear, and capital must not control the media, and Weibo As China’s current de facto news infrastructure, it cannot be a tool for certain interest groups to manipulate public opinion.”

As a “Chinese concept stock” that has been listed in the United States for seven years, Weibo is also facing the squeeze of the geopolitical tensions between the two countries.

“China Concept Stocks”, the full name of China Concept Stocks, is the collective name for all overseas listed Chinese stocks.

In July 1993, Shanghai Petrochemical (Sinopec), as a pilot company, became the first Chinese state-owned enterprise officially listed on the New York Stock Exchange. By 2005, there were only 36 Chinese companies listed in the United States, with a total market value of about 260 billion US dollars. It accounts for 1% of the total market capitalization of U.S. stocks.

In the past 15 years, the number of companies that went public in the United States has increased along with China’s economic development. The “China Concept” has also changed from an initial gimmick to a value investment that investors value. For example, the stock value of many Chinese companies after listing in the United States has greatly exceeded the valuation at the time of the initial public offering. When Alibaba, the largest Chinese company in the US stock market, went public in 2014, the company was valued at 21.767 billion U.S. dollars. Now it has reached 505.6 billion U.S. dollars, which is 25 times the original value.

However, the theory of “decoupling” between China and the United States has become raging, and the relationship between the two countries has become increasingly tense. The reality facing all Chinese concept stocks is that both China and the United States have erected high walls of supervision at the same time.

In December last year, the U.S. Senate and House of Representatives passed the “Foreign Company Accountability Act” unanimously. This is considered a “really tough trick” for listing Chinese stocks in the United States. The law requires companies to apply to the U.S. The Public Company Accounting Oversight Board (PCAOB) provides audit papers, otherwise it may be forced to delist.

Generally speaking, companies listed in the United States are subject to PCAOB audits. However, this provision conflicts with Chinese laws and regulations.

In the course of auditing the company, the accounting firm will be able to obtain various materials of the company and form audit work records. These materials are called audit papers.

A number of Chinese laws and regulations clarify that files such as audit manuscripts should be stored within the country and must not be transmitted to overseas institutions or individuals by any means and technology in violation of relevant regulations. The reason is that it involves state secrets, information security and national sovereignty.

If PCAOB wants to review a Chinese company, it needs to obtain the consent of the Chinese regulatory authorities to cooperate in the review. In fact, in 2013, the Chinese and American securities regulators signed a memorandum of cooperation in this regard. Even so, the audit manuscripts that PCAOB can obtain are extremely limited, failing to achieve effective supervision of all listed companies.

China is not the only country obstructing the supervision of the US Public Company Accounting Supervision Committee, but considering the size of China’s economy and the number of listed companies in the United States, Chinese concept stock companies have become the focus of dissatisfaction with the US committee. In April this year, PCAOB announced the list of listed companies that prevented financial audit companies from providing audit documents to the committee. More than 90% of them were Chinese companies, and other companies were from France, Belgium and other countries.

After the “Foreign Company Accountability Act” took effect, Chinese concept stock companies listed in the United States were caught in a conflict between the two countries’ regulatory authorities. The choice before them is to either delist and find another place to go public; or switch to an audit firm and accept audits from the United States; or accept a two-tier audit from China and the United States, pushing up audit costs.

At the same time, China has also promulgated the “Cyber ​​Security Review Measures,” which has also been interpreted by the outside world as China’s measures to respond to challenges in the information security field. For example, Didi Chuxing was deemed to be inadequate in information security because it involved users and map data. After more than 150 days of low-key listing in the United States, under pressure from Chinese regulators, it announced a “return to the United States and return to Hong Kong” to go public.

The return of technology companies from U.S. stocks to Hong Kong stocks has become a trend. The Hong Kong Stock Exchange also seized the opportunity to reform its mechanism to actively welcome the “return” of Chinese concept stocks.

The reasons for the return are the same as the reasons why technology companies chose the United States. At that time, most companies went to the United States. On the one hand, the U.S. stock market gave high valuations because of its preference for technologically innovative companies. At the same time, the U.S. stock market was highly mature and the market was open, which brought excellent liquidity. On the other hand, China has long been The threshold for listing on the A-share market is relatively high, such as requiring companies to make profits for three consecutive years. It is more difficult for technology companies with emerging models to meet these requirements; Hong Kong stocks also have requirements such as “same share with the same rights”, which imposes more restrictions on technology companies. many.

At present, both Hong Kong stocks and A-shares have been loosened. The Hong Kong Stock Exchange has revised its rules to allow “same shares with different rights”, which has successfully attracted Xiaomi and other companies to list in Hong Kong. At the same time, it provides convenience for the acceptance of Greater China and overseas companies to use Hong Kong as a secondary listing site, and even announced that secondary listed companies will be allowed to be included in the Hang Seng Index. The A-share market has established a science and technology innovation board in Shanghai, which also allows different rights to the same shares, abolishes a series of listing thresholds, and implements a registration system.

However, the problem of US stocks has become more prominent. The main market for Chinese concept stocks is mostly concentrated in China. US stock investors do not understand the development potential of companies as well as local investors and tend to give lower valuations; as well as the deteriorating Sino-US relations and the ever-tightening Regulatory measures. These factors have jointly promoted the return of Chinese concept stock companies.

The option adopted by the Chinese concept stock company is to retain its listing in the United States and at the same time open a secondary listing in Hong Kong. Including Alibaba, JD.com, NetEase, etc., have successfully relisted in Hong Kong. In addition, there are 34 Chinese concept stock companies qualified for secondary listing in Hong Kong, many of which have already started the process. After the second listing of these companies in Hong Kong, it is possible to gradually increase the scale of transactions in Hong Kong and eventually delist from the U.S. stock market. Other companies directly choose to privatize, delist from U.S. stocks, and then choose a place to go public again.

In this process, Hong Kong became the biggest beneficiary. The original annual IPO level was comparable to that of the NYSE. If more than 30 Chinese concept stock companies return to Hong Kong, it will bring more than US$500 billion in capital and strengthen Hong Kong as an Asian financial institution. The position of the center.

Anbang think tank believes that the Chinese concept stock model in the past 20 years is the product of the tacit understanding of the two sides under the strategic cooperation between China and the United States. Now that the competitive landscape between China and the United States is becoming increasingly clear, the gray space and tacit space that existed in the past will continue to be affected. Compressed, the margins of both parties will be clearer and clearer. This kind of boundary is actually the boundary of geopolitical power. In other words, there will be no “last train” for Chinese companies going public in the United States in the future. The return of Chinese concept stocks may not only be an active choice of companies, but also an inevitable way out for changes in the market structure.