A Study on Sina’s Delisting under the Variable Interest Entity Structure Model: Motivations, Pathways, and Effects

Abstract

Purpose - In recent years, with the increasingly stringent regulatory conditions for U.S. stocks and the full implementation of China’s registration system, Chinese stocks made a wave of privatization exits. The purpose of this study is to explore the intrinsic motivations for the privatization of Chinese stocks, analyze its privatization approach and implementation path, and the resulting effects of privatization.
 Design/Methodology/Approach - Taking Sina as the object of study, a case study approach is adopted to analyze the intrinsic motives, paths, and effects of privatization based on the analysis of its Variable Interest Entity (VIE) shareholding structure.
 Findings - Valuation discrimination, business hollowing, and fragmentation of shareholdings are the main drivers of privatization exits. Adopting a long form merger model is an effective route to delisting, and delisting contributes positively to the short-term effects on the market. It also contributes to the diversification of the company’s business and the governance of its shareholding structure.
 Research Implications - This research verifies the theory related to privatization, enriches the case study literature on the delisting of listed companies, and provides experience and reference for enterprises intending to delist abroad. It has important reference significance for maintaining the normal order of A-shares and improving the delisting system.