There appear to be a plethora of questions on what happens when your Chinese counters get delisted. While it is anyone’s guess, below are three possible paths that Pika World believes could be the scenario.
💰#1: Shares Buyback
The Chinese company would buy back its shares from investors based on an agreed price with the shareholders. This is a path towards privatization. But, of course, if the company aims to go public, it can do so with a separate listing, such as in Hong Kong.
📲#2: Share Transfer
Investors would exchange their Chinese ADR shares for the company’s foreign stocks. Unfortunately, since Didi does not have any secondary listing, it will need to possibly begin a listing in perhaps Hong Kong or Shanghai to begin the transfer mechanism for its ADRs.
🧨#3: Trap Big Time
If Didi does not buy back its shares and does not begin a new listing, then the ability to trade its shares are in jeopardy. Essentially, investors will own the company’s equity but are unable to do normal trading in a regulated exchange. There is the likelihood of trading in the over-the-counter markets (like Luckin Coffee which Pika Nat holds) for some. The downside is OTC counters have limited liquidity, and you might be in a trap to hold till a new listing is commenced.
We hope you enjoy this read. Have a wonderful lunch!
Cheers,
Pika Nat
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