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Industry : Equity Research/Analytics
Functional Area : Getting Started
Activity: Question posted: 05 26 2008 21:19:44 +0000, 1 answers, 171 views, last activity 07 06 2010 20:18:08 +0000
 
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I would like to know what are the basic requirements for a company been listed in NASDAQ or HK stock market?


What are the reasons why so many chinese companies, especially Alibaba, choosing IPO at HK recently? Is it because of more strick rules of US stock market or for any other unknown reason? can anyone give me some idea?

 
  Answered by     Pooja Dangi, Associate, Irevna  | 05 26 2008 21:20:51 +0000
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What a company wants is cheap and effective regulation. In the one hand, you want cheap regulation because you want to spend your time running your business rather than dealing with regulations. On the other hand, you want effective regulation since any scandals in the stock market will reflect badly on your business, and if you are an honest businessman, you want to get rid of the dishonest people since it is hard for someone honest to compete fairly against someone who is dishonest.

The problem with US markets is that the accounting and stocks scandals of the early 2000's badly hit investor trust of US markets. The response of the US was to pass lots of new regulations, but things like Sarbanes-Oxley greatly increase the cost of compliance while not necessarily increase actual good business practice. In addition, there is a huge amount of securities litigation which is also of questionable usefulness in creating strong markets.

The good thing about Hong Kong is that it has developed a very strong and efficient regulatory and legal system, while at the same time not adding unnecessary compliance costs. There have been no major stock scandals in Hong Kong in a long, long time, while at the same time there isn't some of the legal silliness that one finds in US markets.

This is very crucial for Chinese companies. One of the main reasons that Chinese companies list overseas is to get a "seal of approval" from offshore regulators since no one really trusts the domestic regulators.

 
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