Research On Overseas-Listing Of Chinese Internet Companies

The rapid development of IT in the end of the last century has set off a surge of new internet economic boom in the United States and with the help of this, U.S. stock market continuously set a new high in these years. As one of the three major indexes in the United States, the Nasdaq Composite Index has successfully exceeded5000points at one time, and at the same time, the boom in overseas stock market has attracted the attention of those enterprises which desired to be listed. As the first Chinese Internet company going listed abroad, the CDC group made its IPO in Nasdaq in July,1999, and the next year SINA, NTES and SOHU joined this group with their IPO in Nasdaq. Since then the gate of overseas market has opened to Chinese Internet companies. After the burst of the IT boom in the United States, the depression in the overseas markets have remained in a few years and Chinese Internet companies have stopped their listing plan in this period. However, with the recovery of the overseas stock market, a number of Chinese Internet companies began their listing plan in2004and2005, which included SNDA, BIDU and Tencent. And with the guidance of these successfully listed companies, Alibaba realized its listing plan in2007when it went public in Hong Kong Exchange. Since2009, with the rapid development of the Internet Industry, many leading Internet companies in China has successfully made their IPOs in overseas markets, such as YOKU, TUDO, DANG, QIHU and so on. So far there have been many Chinese Internet companies realized their listing plan in overseas markets and look back to these years, Chinese Internet companies have experienced the test of the burst of IT bubble as well as the financial crisis and among these companies there have emerged excellent enterprises such as SINA,BIDU and Tencent.Seeking financial support is an inevitable problem every enterprise has to face when it develops and it makes no exception for Chinese Internet enterprises.In general, financing can be divided into internal financing and external financing. Internal financing means to solve the demand for funds by internal accumulation within the company, but for Internet companies the internal financing usually can’t cover the financing needs entirely because its demand for funds is quite huge. And external financing is generally divided into bank loans, bond financing and equity financing. Because most Internet companies which are in desperate need of funds often suffer financial loss when they’re just founded, they usually can’t solve their demand for funds by bank loans. Besides, the underdevelopment of our bonds market has made it difficult for Internet companies to raise funds through this channel. As a result of these, equity financing has become very important for Chinese Internet companies. Generally speaking, those potential Chinese Internet companies can get access to funds by the involvement of foreign venture capitals, yet the purpose of these VCs is to make profits by their sellout of stocks after these Internet companies make their IPOs in the market. On the other hand, the funds brought by the VCs are usually unable to meet the demand of the Internet companies, so raising funds in the stock market has been very vital for Internet companies.When overseas listing has solved the demand for funds and brought honor to Chinese Internet companies, it has brought severe challenges to them as well. Most of Chinese Internet companies view the relaxed conditions in the overseas market as one of the reason that they choose to list on foreign stock market, while they often ignore the strong pressure brought by the strict information disclosure system, as well as operating income and other financial indicators. So this requires Chinese Internet companies to gradually adapt to these changes. Besides, compared to our domestic stock market, there are many hedge funds which like to figure out the shortcomings of information disclosure or financial factors about a certain company so as to release a bearish report on this company’s stock and finally achieve their goals to suppress the stock price. The "Chinese Concept stocks Crisis" occurred in2011was because of the reasons mentioned above, including some Chinese Internet Companies, many of Chinese companies suffered a great loss during this period. For Chinese companies, they give more attention to the preparatory work before they go public, but they often ignore the obligations they need to fulfill after their listing. So all of these needs to give Chinese Internet companies which listed overseas more attention. In view of this, with the method of specification analysis and empirical analysis, this paper studies the courses, reasons and ways of Chinese Internet companies overseas listing, as well as the performance after their listings. On the basis of this, this paper analyzes the problems Chinese Internet companies often face when they list on overseas markets and present ideas to these problems. Generally, this paper is divided into five chapters.As the preface of this paper, the first chapter introduces the background and significance of this topic and reviews relevant literatures about this, and then introduces the research method about this article and proposes the framework, innovation and shortcomings of this paper.The second chapter introduces the listing courses of Chinese Internet companies and analyzes the reasons and ways of overseas listing. The first section of this chapter reviews the four stages of these courses and find out the difference among the four stages. The second section analyses the reasons for these companies going abroad and realizes the relaxed conditions, involvement of venture capitals and the demonstration effect are the main reasons that they choose to list abroad. The third section analyses the ways of listing for these companies and divides the studies into two levels. In the view of the first level, the ways can be divided into direct IPO, reverse merger and the issue of DR. In the view of the second level, they can be divided into red chips, VIEs and Options.With the method of event study, the third chapter of this paper analyses the market performance of Chinese Internet companies after their listings. The first section introduces relevant concept and research procedures about event study and the second section analyses the market performance about Chinese Internet companies within200days after their listings and get a conclusion that their performance is worse than the stock market, on the basis of this, this section conducts a further research on the performance of those Chinese Internet companies with loss status before their listing and get the same conclusion. With the same method, the third section studies the Chinese Internet companies’ performance during the "Chinese Concept stock Crisis"The fourth chapter researches the problem facing Chinese Internet companies in recent years. The first section discusses the problem that many Internet companies chose to postpone their overseas listing plan since2011and the second section analyses some Chinese Internet companies delisting problem and the last section studies on the problem about the VIE structure.The fifth chapter is the last part of this paper. The first section of this paper summarizes the study of this paper and on the basis of this research, the second section makes some recommendations about overseas listing for Chinese Internet companies.