When Wang Jianlin took Wanda Commercial Properties public in Hong Kong in 2014, the $3.7bn flotation marked something of a coming out for the tycoon. Known on the mainland for his Wanda Plaza developments, he was starting to gain an international reputation as a dealmaker, buying cinemas and eyeing US film studios.
Since then Mr Wang’s deals and his property developments have established him as China’s richest man. However, investor appreciation for Wanda Commercial, the core of his empire, has not matched this success. In fact, just 15 months after going public, Mr Wang said he was considering taking the business private again.
It is widely thought that, like a host of US-listed Chinese companies currently being taken private, Wanda will eventually seek to relist in Shanghai or Shenzhen, where valuations are usually higher. In the meantime, though, the proposed move highlights another trend: growing Chinese dissatisfaction with the equity market options available to their companies.
Take Hong Kong, the natural home for Chinese groups. Mainland companies make up more than half of the city’s Hang Seng index but are valued well below local stocks as well as mainland-listed compatriots: the Hang Seng trades on 11 times expected earnings; the blue-chip mainland CSI300 trades on 13 times, but the Hang Seng China Enterprises index, made up exclusively of mainland-based groups, trades on a multiple of just 7.
以中资企业天然的上市大本营——香港——为例。中国内地企业在香港恒生指数(Hang Seng index)中占了一半以上的比重，但估值远低于香港本地企业，也低于在内地上市的企业：恒生指数的预期市盈率为11倍；内地由蓝筹股组成的沪深300指数(CSI 300)预期市盈率为13倍，而全部由内地企业构成的恒生中国企业指数(Hang Seng China Enterprises Index)预期市盈率只有7倍。
New York does not offer a particularly attractive alternative. Valuations are better than in Hong Kong but, outside the likes of Alibaba and Baidu, most companies struggle for attention. Momo, the online dating site currently pursuing a $2.3bn take-private backed by Alibaba, is a case in point. There are just two analysts currently following the stock, according to Bloomberg.
But even going home and seeking a relisting is not entirely appealing. There are several hundred companies in the queue for initial public offerings, and the timetable is controlled by officials. Root-and-branch reforms to the clunky process, promised after last year’s mainland boom and bust, are a long way off.
If that were not enough, this month the China Securities Regulatory Commission said it was examining the effect that returning take-privates could have on mainland markets — a study that includes reverse mergers into shell companies as well as IPOs. One fear is that restrictions will be imposed. Shares in US-listed target companies promptly fell. Hong Kong, too, has voiced concerns about backdoor listings on its markets. Most of these are from the mainland.
As a result, many Chinese groups rely on private money and, for tech groups, this is readily available. Lufax, the online platform known for peer-to-peer lending, raised $1bn in a January round that valued it at $18.5bn. Ant Financial, the financial affiliate of Alibaba, raised $4.5bn last month for a $60bn valuation. Just last week, Apple put $1bn into Didi Chuxing, China’s dominant online taxi-hailing group.
“For a Chinese company with a good story, raising private equity isn’t difficult,” says Keith Pogson, senior partner in EY’s Asia financial services practice. “Investors are tired of the volatility of public markets and watching an investment go up and down, particularly in China. They just want to see how it pans out over the long term.”
Private Chinese groups can also move more quickly. Anbang Insurance, which launched $20bn of hotel bids within two days in March, demonstrated the benefits and limits of that. Not having to seek shareholder approval removed one hurdle for a deal that, like all Chinese transactions, also needed regulatory approval. However, the group later ran into criticism over a lack of transparency in its structure and funding. Its larger proposed deal, a $14bn bid for Starwood, ultimately failed.
At some point, though, private investors in Ant Financial, Lufax and the like will want an exit and, in all probability, public markets will be the only means of providing it in sufficient scale — as was the case for Alibaba.
