China Watch Blog has learnt that profit warnings, auditor disputes and delistings involving Chinese mainland companies trading on foreign exchanges are fueling investor distrust, wiping out valuations and poisoning the market for new listings.
The 180 Chinese mainland companies that have gone public in New York, Hong Kong and on other global exchanges since the start of 2010 are trading on average 21 percent below their offer prices, according to data compiled by Bloomberg.
At least six disputes have broken out this year between auditors and Chinese mainland companies listed in Hong Kong. More than a quarter of Chinese mainland companies that went public on the city’s main board in 2010, a record year for volume, have lowered forecasts since they started trading, compared with less than 10 percent of non-Chinese mainland companies that had IPOs there that year.
“Investors have been concerned: Are these companies accurately portraying themselves?” said Kevin Pollack, a fund manager at Paragon Capital LP in New York. “There has absolutely been collateral damage. Unfortunately, having big-name auditors and bankers behind a company doesn’t guarantee it’s free of issues.”
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