More Chinese Firms Eye European Listings Amid US Clampdown
Hou Xintong | Feng Difan
DATE:  Mar 24 2023
/ SOURCE:  Yicai
More Chinese Firms Eye European Listings Amid US Clampdown More Chinese Firms Eye European Listings Amid US Clampdown

(Yicai Global) March 24 -- Growing numbers of Chinese companies are choosing to issue global depositary receipts in Europe, thereby broadening their overseas financing channels at a time of increasingly strict oversight of US-listed Chinese businesses by financial watchdogs in the United States.

A total of 41 China-listed companies have announced that they are moving forward with plans to go public in Europe via GDRs, with 38 choosing Switzerland, as of March 22, according to publicly available figures. Two others selected the London Stock Exchange and one chose Deutsche Börse.

Foreign companies account for 25 percent of all the listings on the Swiss Stock Exchange, the same proportion as the London Stock Exchange and higher than any other bourse in Europe. The issuance and approval process for Swiss GDRs tends to be simpler and more convenient than on other exchanges, reducing the cost of a floatation.

Under the GDR mechanism, Chinese businesses do not need to directly sell shares overseas, but can issue depository receipts abroad based on their Chinese mainland-listed stocks. With depositary receipts, foreign investors can enjoy “shareholder” rights such as dividends, capital gains, and voting rights.

Last year, some Chinese companies that were trying to expand were keen to issue GDRs in secondary listings overseas, thereby continuing to raise funds and conduct outbound mergers and acquisitions. 

A report by China Fortune Securities said there have been several improvements in overseas GDR financing for companies, including reduction in equity dilution and broadening of financing channels, as well as attraction to overseas long-term investors and improvement of businesses’ shareholder structures.

Another reason for the growing interest in European listings is the increasingly strict supervision of Chinese companies listed in the United States by financial regulators there. As of the end of last July, the US Securities and Exchange Commission had included 159 Chinese concept stocks for “pre-delisting” under the Holding Foreign Companies Accountable Act. 

Editor: Tom Litting

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Keywords:   GDR,EU,Switzerland