Friday, August 18, 2006
Share Conversions in China
Thanks to AsiaBizBlog for the link to a White & Case article on share acquisitions in China's stock markets.
The article contains a good discussion of China's bifurcated securities markets. In the 1990's, China created a bifurcated securities market with different types of shares for domestic investors and foreign investors (this isn't all that unusual; Mexico had done the same). Certain types of shares trade at a discount to others. Shares that are trading at a discount create an "overhang" in the market in much the same way that outstanding options do. Because of this, the PRC is now working toward convergence of the various types of shares.
The White & Case article goes on to discuss the process of conversion and various legal issues relating to pricing, disclosure and insider trading that arise during the process.