Sina Corp’s US Stock Market Departure Could Herald a Wave of Chinese Delistings

Epoch Times ^ | 12/28/2020 | Fan Yu

[SeekAndFind]

Chinese internet firm Sina Corp. agreed to go private and delist from Nasdaq, twenty years after its landmark U.S. IPO that led to a wave of Chinese companies listing their shares in the United States.

Sina’s decision was crystallized after an entity led by its chairman Charles Chao sweetened the acquisition offer to $43.30 a share. New Wave Holdings, the entity making the takeover bid, increased its offer from its initial one in July 2020 of $41 a share.

Inglorious End of a Trailblazer

Sina was founded in 1998 by a group of software engineers and started out as an internet portal.

Sina went public in New York in April 2000 during the dotcom heyday, becoming the first Chinese company to list its shares in the USA. Its IPO was quickly followed by other Chinese internet giants Sohu.com and NetEase in the same year.

The company was a pioneer, using an unusual structure to get around China’s laws prohibiting foreign ownership of its internet companies. Since Sina’s 2000 IPO, almost all of China’s technology companies followed a similar listing structure, called the variable interest entity (VIE) structure. U.S. investors would buy shares in a Cayman Islands or British Virgin Islands-registered holding company, which then contracted with China-domiciled entities to earn revenues. This practice was followed in subsequent, more high profile, IPOs such as those of Alibaba, JD.com, and Baidu.

The VIE structure allowed Chinese companies to bypass Beijing rules and enabled entities to raise hundreds of billions of dollars in U.S. capital and hundreds of millions of dollars in fees for U.S. banks and law firms assisting in the IPOs.

Sina’s big break came in 2009 with its launch of Weibo, a Chinese microblogging website similar to Twitter. In the same year, Twitter was banned in China by Communist authorities.

[McGavin999]

Twitter was banned by communists? It’s totally infested with communists.

[nascarnation]

Re: Tweater

What’s “good” for us is not necessarily good for their serfs.

[shotgun]

I guess they decided they didn’t want to meet the same requirements as every other publicly listed company. Go figure

[Seruzawa]

Twitter is not exactly communist. It's more of an:

The ChiComms demand total control of every aspect of the platforms. Twitter, even though highly inimical to American conservatives is still far too free-wheeling for the totalitarian ChiComms.

[Svartalfiar]

The company was a pioneer, using an unusual structure to get around China’s laws prohibiting foreign ownership of its internet companies. Since Sina’s 2000 IPO, almost all of China’s technology companies followed a similar listing structure, called the variable interest entity (VIE) structure. U.S. investors would buy shares in a Cayman Islands or British Virgin Islands-registered holding company, which then contracted with China-domiciled entities to earn revenues. This practice was followed in subsequent, more high profile, IPOs such as those of Alibaba, JD.com, and Baidu.

This may have worked to get around Chinese rules on foreign ownership, since the actual company assets weren't owned by the IPO company. But I fail to see how it got around US rules with a listing of companies with no actual assets or revenues?