KongZhong Corporation, which runs the Chinese online gaming website kongzhong.com and got listed on New York's Nasdaq in 2004, announced on Monday (U.S. time) that it would delist and become a private company.
However, experts noted Tuesday that the website's privatization strategy is in fact aimed at gaining the financing advantages offered by the A-share market.
KongZhong Corporation announced in a statement on its official website on Monday that its board of directors had received a letter from Wang Leilei, chairman and CEO of the company, and one of the company's investors IDG-Accel China Growth Fund to acquire all of the shares of the company not owned by them or their affiliates for $8.56 in cash per American Depositary Share, which represents securities of a non-US company that trades in the US financial markets.
Wang called the privatization program a "milestone" in kongzhong.com's history of development in a public letter to the company employees on Monday.
"Privatization will lead every team and every member of the company to renew their entrepreneurial mindset and a hardworking spirit," Wang said.
Wang also said that the company would adopt a more flexible incentive mechanism after it goes private.
Wang Yiqian, an analyst at Beijing-based iResearch Consulting Group, told the Global Times on Tuesday that many U.S.-traded stocks of Chinese companies are undervalued compared with stocks on the A-share markets, and Chinese companies listed overseas would choose to turn to domestic stock markets to meet their financing requirements.
"Around 2013, kongzhong.com, along with a number of domestic gaming companies, started to promote their mobile gaming business. Such new businesses often require a large amount of investment, and that pushes the companies to delist from overseas stock markets, even though they might need to give up some advantages of overseas listing, such as the convenience in expanding their overseas business," Wang said.
Domestic finance information website caixin.com reported that 23 Chinese enterprises, six of which are gaming companies, have delisted from overseas stock markets since January.
