Why China’s biggest game companies are privatizing

Is China’s gaming market getting sick of America’s stock market? It’s starting to look that way. Giant Interactive (NYSE:GA) announced Monday that chairman Shi Yuzhu has set in motion a plan to buy up all of the company’s outstanding overseas stock. At $11.75 per share, that would make the Giant buyback a $295 million proposition. But Giant may not be the only Chinese game company looking to ditch the US stock market; media reports from earlier this year suggest that The9 (NASDAQ:NCTY) chairman Zhu Jun has also been speaking with investors, reportedly with the aim of raising enough money to buy the company back and delist it.

So why privatize? Companies often list for the funding and, in China, because listing overseas is seen as one of the pinnacle hallmarks of success for a Chinese tech company. Given that Shi Yuzhu is apparently confident he can get the money to buy the company back, it seems unlikely that Giant really needs investment from the public; nor does its founding team need to prove any more about their company’s success. It may be that Giant (and probably The9) are looking to escape the restrictive regulations of the US markets, like the mandatory quarterly reports and filings and the constant assuaging of the shareholders, figuring that they are no longer worth the trouble.

Delisting also protects the company somewhat from the sometimes-unpredictable fluctuations of the market — Chinese companies in particular have sometimes found that their stock price rising or falling may have more to do with America’s mood of the day with regards to China rather than what the company is actually doing. Especially if companies feel they are being undervalued by investors, delisting makes a lot of sense: it gets them off of the volatile market, reduces their overhead because they don’t have to deal with investors and the SEC anymore, and gives them complete ownership of a company they believe will rise in value.

The privatization of Alibaba probably has also helped make the move seem more appealing in recent years; Alibaba is one of China’s most successful and most profitable tech companies.

Whatever the reason for the privatization moves, it looks like US investors may have fewer options to choose from if they’re looking to invest in China’s gaming market in the near future. Among the major game companies that will likely still be around are Shanda Games (NASDAQ:GAME), Perfect World (NASDAQ:PWRD), Netease (NASDAQ:NTES), and Changyou (NASDAQ:CYOU).

The post Why China’s biggest game companies are privatizing appeared first on Games in Asia.

The post Why China’s biggest game companies are privatizing appeared first on Games in Asia.