Private Equity in China -- Time for a New Exit， Wall Street Journal article Jan 2013.pdf

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1、PrivateEquityInChina–TimeForANewExit?Chinawasonceoneofthefewbrightspotsgloballyforprivateequity.Nowit’saquagmire–andinvestorsaregoingtohavetochangethewaytheyapproachthemarket.That’sthefindingofanewreportbyShenzhen-basedprivateequityadvisoryChinaFirstCapital(pdf).Accordingtothecompany’so

2、wnresearch,therehavebeenabout9,000privateequitydealscompletedinChinaoverthepastdecade,butinmorethan7,500ofthoseinstances–or$130billionworthofinvestment–investorsstillhaven’tmanagedtocashout.“Overthelast18months,firsttheU.S.capitalmarkets,thenHongKong’sandfinallyChina’sShanghaiandShenzhe

3、ndomesticstockmarketshavedramaticallyloweredthenumberofIPOsofChinesecompanies,”writesPeterFuhrman,ChinaFirstCapitalchairman,inthereport.“ItseemsmorelikelythannotthatthegoldenageofChineseIPOs,whenover350companieswerelistingeachyearacrosspublicmarketsintheU.S.,HongKongandChina,isnowover.”

4、It’snotaturnofeventsthatwillbeeasilyremedied.AwaveoffraudallegationsleveledbyauditorsandshortsellersagainstanumberofsmallChinesecompanieslistedintheU.S.hasdestroyedinvestorconfidenceinthesectorandallbutfrozennewIPOs.ListingsinHongKongdroppedoffin2012owingtothatmarket’spoorperformance,bu

5、tevenifitrecoversmanyprivate-equity-investedcompaniesaretoosmalltocleartheHongKongbourse’slistingrequirements.AndinmainlandChina,theregulatorhasallbutstoppednewlistingsinShanghaiandShenzhenforfearthatnewofferingswoulddivertliquidityanddrivelowertwooftheworld’smostunderperformingmarkets.

6、AnalyststipChina’sdomesticIPOmarkettocomebacktolifethisyear.PricewaterhouseCoopersexpectsacombined200IPOsraisingbetween130billionyuan($20.7billion)and150billionyuanontheShanghaiandShenzhenstockexchangesin2013,itsaidinareport.Butthat’snotgoingtocleartheprivateequitybacklog.About100compan

7、ieshavealreadybeenclearedbytheChinaSecuritiesRegulatoryCommissiontolisttheirshares,butarewaitingforthemarkettoimprove.Afurther800companieshavealreadyfiledIPOapplicationsandarewaitingforregulator’snod.AndaccordingtoMr.Fuhrman,anadditional600or700companiescouldbereadytoapplyassoo