There is a slew of US listed China-based companies that have either announced non-binding going private offers or have announced they are entering into a definitive agreement to go private. We continue to believe that the sharp increase of China based companies potentially going private was mainly catalyzed by the huge jump in the China A share stock market and the government’s intention to amend securities rules to allow more companies overseas to list themselves in the A share market. However, in the past few weeks, this market has been through a relatively meaningful correction as investors deleverage themselves from margin.

In addition, in order to support the China A share market, the Chinese government also decided to postpone all pre-announced IPOs. These factors have caused the shares of already announced go-private candidates to fall meaningfully over the past few trading days.

Going Private Chinese Companies Getting Cheaper by the Day

We are intrigued by the arbitrage present between the current price of many of these equities and the going private price announced by these companies, some offering a compelling premium discount on the surface. In order to keep visibility on this, we are now keeping track of the difference in those companies’ current prices compared to their pending go-private prices. Furthermore, we are doing more research to determine which companies we would like to potentially buy in order to possibly profit from the current arbitrage. Our due diligence will consist of working to find out which companies will likely be able to complete the go-private process and we will keep our premium members apprised of our progress in doing so.

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