Senior financial analysts from Tochigi Ontario Holdings have commented on Focus Media making a strong comeback following a listing in China after getting removed from the US stock exchange listings two years back.
"Focus Media's removal from US listings was caused by a significant leveraged buyout, the biggest one seen in the country so far. However, the company is back on track to sell shares in China's top share market, courtesy of the firm's decision to undertake a reverse merger," commented Michael Walker, Director of Corporate Equities at Tochigi Ontario Holdings.
Following the footsteps of Focus Media, many other Chinese firms were seen queuing up for a relisting. These companies were a part of US listings as well but had to be taken private.
Focus Media was established in the year 2003 in Shanghai.
In 2005, it came out as a public limited company announcing a hefty $172 million for initial public offerings—this the largest from the side of a Chinese company to NASDAQ. But soon after, the company came face to face with its ill fate while seller Muddy Waters became sceptical of its accounting practices. This controversy alone had pulled down the firm's share values.
Post retaining its position in NASDAQ for eight solid years, founder and Chairman Jason Jiang and private equity companies Fountain Vest Partners, China Everbright Ltd, Fosun International, Carlyle Group LP, and Citic Capital Partners paid $3.87 for Focus Media Holdings to go private.
On Tuesday, when Jiangsu Hongda New Material was completing its legal procedures with Shenzhen Stock Exchange, it stated how it had settled an agreement with Focus Media to buy its shares in exchange of cash and assets. The chemical products manufacturing company's shares held a market value of $622 million (3.6 billion yuan) until it was prevented from carrying out legal market transactions and activities on 10th December 2014.
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| Tochigi Ontario Holdings comments on Focus Media making its comeback in Chinese listing |
Jiangsu Honda acquiring Focus Media's shares will give the latter a place in the stock market listings with the aid of a reverse merger, saving it from the lengthy regulations plus initial public offering. Besides this, it also gives an added benefit to Focus Media shareholders, allowing them to sell their shares shortly, unlike most investors in an IPO whose stocks are held back for a particular period.
After the light was shed on a couple of Chinese companies' unethical accounting practices, they lost their position from the US listings and went private. These Chinese firms were then anticipated to get relisted in the Hong Kong or Chinese stock exchange – a decision by the Chinese firms that was strengthened due to the share market's growth.
Manufacturer of silicone rubber for use in construction and automobiles, Hongda New Material, announced going public again and selling its shares on the stock market by 9th June. Along with Focus Media and Carlyle, the company held back valuable listing information and other financial data as they denied sharing their credible thoughts on them.
"China's economy is not doing too well and has faced an economic decline. Still, its stock market has seen an epic rise in share values, which were double compared to the stock exchange statistics from July 2014," commented Jonathan Turner, Head of Corporate Trading at Tochigi Ontario Holdings.
Moreover, S&P Capital IQ findings state that the top A-share tech firms listed according to their profitability, in China, are having share transactions of 2.62 times more than the forecast of the upcoming year 2016. Compared to similar top US tech firms, they were seen to trade their shares 17.4 times at an average.
Further data from Dealogic revealed how Chinese companies could receive $2.06 from initial public offerings when two technology firms from China bagged $150 million from the US stock exchange.
Speaking of the acquisition percentages, 30.9% of Focus Media's shares were owned by Jason Jiang. Similarly, Fountain Vest and Carlyle had a stake of 19.7%, whereas Fosun International and Citic Capital had 17.4% and 9.8% of stakes. Despite the stake percentages disclosure, Hongda New Material maintained a stoic silence regarding the amount to be received by Focus Media shareholders.