Introduction to the US Securities Market
    The US securities market has a long history and it sprouted during the War of Independence. The first and second industrial revolutions led to the rapid development of the shareholding system. Enterprises used the securities market to raise a large amount of funds. After the economic crisis in 1929, the US government strengthened the legislative supervision and control over the securities market, and the entire market entered the normative development stage. The securities market has thus rapidly developed into the world's largest securities market. On the New York Stock Exchange alone, the amount of securities transactions in 2002 was 10.3 trillion US dollars, accounting for 77% of the global securities trading volume, ranking first in the world. The US securities market has become a "barometer" of the international economy. Therefore, the US securities market is of great significance for the Chinese securities market that is in the development stage.
    The United States has the largest and most mature capital market in the world. New York is the world's financial center. It has gathered most of the world's hot money and venture funds. The total market value of stocks accounts for almost half of the world's total. More than 60% of the world.
The US securities market reflects the distinct characteristics of three-dimensional and multi-level services for different financing needs. In addition to the two stock exchanges of the New York Stock Exchange (NYSE) and the American Stock Exchange (AMEX), there is the Nasdaq Automated Quotations and Trading System (NASDAQ), the world's largest electronic trading market, in addition to Counter trading market such as counter electronic bulletin board (OTCBB). Different markets provide financing services for different enterprises. As long as the company meets the listing requirements of one of the markets, it can apply for “registration” listing on the SEC.
Why do you want to list in the US?
1. Unlimited sources of funds
    Because the US capital market brings together the world's funds, for any good company that knows the rules of the game and has a Wall Street relationship, the opportunities and space for financing are enormous, and refinancing is not restricted. Because the US capital market is completely market-oriented, as long as the performance of private enterprises is good enough, its financing scale and number of financings during the year are unrestricted.
    2, very high company market value
    The US market worships high-quality, high-growth companies, and companies listed in the US have great market capitalization growth. In addition to the domestic A-share market, the US market is still the world's highest market share. The average market win rate of Standard & Poor's is 24~26 times, and the average market win rate of Nasdaq high-tech stocks is 30~40 times. The average market win rate in Hong Kong and Singapore is only 8 to 10 times. Therefore, in the United States, more funds can be raised with higher market win rates. For example, the existing three major websites in China (Sina, NetEase and Sohu) still sprint to a market value of more than $1 billion in the three consecutive years of sluggish stock market. Moreover, such stocks are only small stocks. The large-scale enterprises that are generally formed, such as Yahoo and Amazon, enjoy a market value of nearly 20 billion US dollars. This is the market value after three years of adjustment of the big bear market. The market value of a company is high. It is precisely because the US stock market has such a strong financing function that most growth companies choose the US stock market, especially on the NASDAQ market.
    3. Great market liquidity
    Due to sufficient funds and sound institutions, the US stock market is the largest and most circulated market in the world. Today's domestic stock market has a total transaction amount of about 1 billion US dollars a day, which is only equivalent to the average daily trading volume of US blue chip stocks such as Intel and Microsoft. It can be seen that the capacity of the US market is large.
    4. Mature and experienced investors
    Because the US market is funded as the most important investor, retail investors do not play a big role, so for listed companies that understand fund investors, they will get a group of mature and experienced shareholders, and they are quite stable. High market value.
    5. Reasonable listing expenses
    Compared with the domestic stock market and the Hong Kong stock market, the cost of listing in the United States is lower and more reasonable. In particular, it is cheaper to buy a shell, and the cash cost before listing is only 400,000 to 600,000 US dollars, which is much lower than Hong Kong and Singapore, and the listing standard is not high. Compared with many overseas listed locations, the United States is based on its many listed companies. The clean "shell" resource company is also cheaper and richer, and it has a long history of listing (buying) shells, and the relevant laws and policies are less restrictive. With the advantage, in the current stock market downturn, the value of the shell is decreasing, it should be an excellent opportunity for domestic companies with strength and strength. It is also important to note that the results of the backdoor listing are guaranteed.
    6, rigorous law, high transparency
    For large listed companies that focus on long-term development, formalization and internationalization, the legal protection and transparency of the US stock market will have far-reaching effects, which will not only enhance the company's image and internal culture, but also attract more confident worlds. Level investor.
    7, the backdoor listing operation time is short
    It is listed in the US national market through the backdoor listing method. It takes up to 6 months from the official signing of the agreement, and only 3 and a half months in the short period.
 
    US listing conditions
    There are three major securities exchanges in the United States, NASDAQ, the New York Stock Exchange (NYSE), and the US Stock Exchange (AMEX). Only when the company meets the requirements of the various markets for the company can its stocks or securities be issued and traded in the market.
    1. NASDAQ (NASDAQ)
Nasdaq mainly judges whether a company meets the listing conditions through the lowest selling price of the company's stock, company assets, and so on. Nasdaq’s requirements for national capital markets and small and medium-sized capital markets are different.
    National capital market
 
    A. The minimum price of the initial issuance of the stock shall not be less than US$5 per share; the subsequent transaction price shall be maintained at more than US$1 per share to prevent the listed company from intentionally selling at a low price, thus protecting the reputation of Nasdaq. .
    B. The company’s tangible net assets must not be less than $6 million and have a revenue of no less than $1 million in the most recent fiscal year or more than $1 million in two fiscal years in the last three fiscal years. At the same time, the company also needs to meet the public shareholding of not less than 1.1 million US dollars, the total value of not less than 800 US dollars; has at least 400 shareholders; not less than 3 market makers.
    C. If the company does not meet the above conditions, Nasdaq will have an alternative measure. That is, the market value of 75 million US dollars or not less than 75 million US dollars of assets and 柒 75 million operating income and the initial stock issuance price is not less than 5 US dollars a share.
    D. Listed companies are subject to review each year and their financial systems are subject to review every three years.
    2. Small and medium capital markets
    A. The company's sizable assets are not less than US$4 million; or the market value is more than US$50 million; or the company's net income in the most recent fiscal year is not less than US$750,000; or the company's last three financial years The net income for two fiscal years is not less than $750,000;
    B. The public shareholding is not less than 1 million, the total value is not less than 5 million US dollars and there are at least 300 shareholders and 3 market makers;
    C. The initial issue price is not less than 4 US dollars per share, and must be maintained at more than 4 US dollars per share;
    D. The audit of the company is in line with the requirements of the general market.
    Second, the New York Stock Exchange (NYSE)
    1. Distribution and value of equity
Companies wishing to list on the New York Stock Exchange must have 5,000 shareholders; the public shareholding must be no less than $100 million or the company's initial public offering should be no less than $60 million.
  2. Financial requirements
    The company’s profit for the most recent fiscal year reached $4.5 million before tax, or the total profit for the last three fiscal years reached $6.5 million before tax. The public shareholding is more than 5.000, and the total value is not less than 100 million US dollars.
    Third, the US stock exchange market (AMEX)
    General judgment standard
    In the past year or two years in the past three years, the annual pre-tax income is not less than 750,000 US dollars; the public shareholding market value is not less than 3 million; the initial issue price is not less than 3 US dollars per share, the common stock of shareholders Not less than $4 per share. The public shareholding is 4 million, with a total value of not less than $3 million.
    2. Special judgment criteria
    The public holds a stock market value of 15 million US dollars; the initial issue price is not less than 3 US dollars per share, the shareholders' common stock is not less than 4 US dollars per share; the company must have at least 3 years of operation time.
 

 
 
 
US way of listing
    Generally speaking, Chinese companies can enter the US capital market in the following four ways:
    1. Initial Public Offerings (IPOs) of common stocks
    The stock market disaster in the early 1930s caused foreign companies' stocks to plummet in the US stock market. American investors instantly lost hundreds of millions of investments. This historical event led to the official implementation of the 1933 US securities law. Since then, the US Securities Law has the same regulation as the local companies for the initial public offering of foreign companies in the United States. Without exception, the company must register. Depending on the size of the company and previous disclosures in the United States, the SEC has also developed different forms for foreign companies to register for use.
    Basically, offshore companies, like US companies, must disclose the same information to the Securities and Exchange Commission (SEC) and investors in the same format. For many offshore companies, the disclosure system in the US securities market is deeply uncomfortable. US financial disclosures and accounting standards are more detailed and rigorous than in many countries. For example, their requirement for market competitive position in the company and mandatory disclosure of prospects for management are an example of a headache for foreign companies, but Strive to have a position in this vast capital market, and foreign companies can only do as the Romans do. In order to soften this discomfort, the SEC allows offshore companies to adjust their financial statements to comply with US accounting principles, and does not necessarily have to be produced in accordance with US standards.
In addition, once the shares of an offshore company are publicly traded, the company must also report to the SEC on a regular basis in accordance with US securities trading laws.
2. American Depositary Receipts (ADRs)
China Life Insurance Co., Ltd. was officially listed on the New York Stock Exchange (NYSE) and the Hong Kong Stock Exchange on December 17 and 18, 2003 respectively. As the first Chinese state-owned financial enterprise listed simultaneously in the two places, it won 25 times oversubscribed multiples, issued a total of 6.5 billion shares, raised funds of 3.5 billion US dollars, the highest record of IPO financing in the global capital market for the year, and achieved the success of overseas listings. China Life Insurance is an example of a successful listing of Chinese companies through ADR.
The US securities industry has created this mechanism for porting foreign securities to the United States. Depository stock exchanges provide securities that convert offshore securities into easy-to-trade and dollar-based payments. So far, China Unicom, China Mobile, Sinopec and other companies have listed in the US through this method.
A typical ADR is so working:
(1) Bank of America and an offshore company signed an agreement stipulating that the US bank should act as the depositary of the securities of the overseas company.
(2) The depositary of the United States issues a depositary stock certificate to an investor in the United States. Each depository shareholder represents a certain number of securities of an offshore company and the voucher is freely traded.
(3) The American depositary acquires the securities of the corresponding number of overseas companies. Generally, the securities are kept by the overseas custodian banks.
(4) After the deposit of the depositary shares, the American Depositary Bank acts as the payment agent of the holder of the certificate. The bank collects the dividend and converts it into US dollars, which is then distributed to the holder of the stock.
(5) The depositary bank acts as the transfer agent of the depositary share certificate and records the transaction of the investor's investor in the United States. The bank is also ready to convert the stock into the corresponding foreign securities.
The US Securities and Exchange Commission treats ADR and the foreign securities it represents. At the same time, the issuance of ADR also involves the public offering of securities. Therefore, the US bank that issues the ADR also needs to register, and the offshore company is required to fulfill its obligation to report regularly.
However, fulfilling full registration and reporting is particularly expensive and burdensome. In view of this, the SEC has developed different ADR plans and corresponding different disclosure requirements based on the status of overseas companies in the US securities market:
Primary ADR
The SEC's regulation of Tier 1 ADR is the lightest. Bank of America can establish a Level 1 ADR by registering the F-6 form with a depository agreement and ADR credentials.
If an offshore company submits to the SEC an annual list of information disclosed and disclosed in its own country, its periodic reporting obligations in the United States may be waived. Level 1 ADRs can be quoted on the pink list of agents and wholesalers but cannot be quoted on the stock exchange or on the NASDAQ. This level of ADR is primarily intended to provide US investors with access to stocks of off-the-shelf offshore companies but cannot be used to raise funds.
The cost of establishing a Level 1 ADR is relatively small, averaging $25,000. The benefits of offshore companies are large, and the stock price usually rises by 4-6%.
Secondary ADR
Secondary ADRs can be traded on the US stock market. Bank of America must use the F-6 form to register, and overseas companies must report regularly. In order to be able to trade on the stock exchange or on the Nasdaq, overseas companies are also required to register on the 20-F form. However, like the primary ADR, the secondary ADR cannot be used as a means of raising funds.
Overseas companies applying secondary ADR have found that the disclosure requirements required by the US Securities and Exchange Act are more detailed and deeper than those of their own country. Most importantly, the financials of offshore companies must comply with US general accounting standards. For example, US GAAP requires classified disclosure of company operations, as well as sensitive (sometimes embarrassing) information, including major assets, any Significant ongoing litigation or government investigation of the company, the identity of 10% of shareholders, the sum of management compensation, transactions between companies and subsidiaries or executives, etc. The company must also update the 20-F form annually.
The cost of establishing a secondary ADR is huge, averaging over $1 million. However, the results have been enormous. The channels for foreign investors to open to US investors and the US GAAP-based disclosures usually cause the company's share price to rise by 10-15%.
Tertiary ADR
Overseas issuing companies make their own securities publicly issued to US investors. The registration form for this level of ADR must essentially include the requirements of the 20-F Annual Report for Level 2 ADR. Level 3 ADRs are the only form of ADR that allows offshore companies to finance in the United States. The establishment of Level 3 ADRs must be conducted in a procedure similar to the initial public offering of common stock. The public offering of common stock in the United States generally costs more than $1.5 million. But for many offshore companies that need a lot of money, even if the cost is high, the third-level ADR is worth trying because the US public capital market provides an unparalleled financing base.
Global Depositary Shares (GDRs)
Overseas issuers can also facilitate the trading of their securities by issuing depositary shares issued in US dollars and globally issued. The principle of a global depositary share certificate is the same as that of an American depositary share certificate. The only difference is that the global depositary share certificate is operated partially or wholly outside the United States. Regardless of the Global Depositary Shares or American Depositary Shares, the laws applicable in the United States are the same.
3. Private Equity and US Securities Act 144A
Private equity is a way of avoiding the registration required by US securities laws and selling securities in the United States.
However, US securities regulations have many restrictions on the sale of private equity securities. The 144 A regulations adopted by the US Securities and Exchange Commission in 1990 allowed certain eligible securities to be sold to qualified institutional investors without the obligation to disclose securities laws. However, transactions associated with the 144 A Regulation must meet the basic conditions:
(1) The securities must be sold only to qualified institutional investors;
(2) At the time of the issuance of the securities, the securities cannot be traded in the same type as the securities quoted on any stock exchange in the United States or in the brokerage inquiry system such as Nasdaq;
(3) Sellers and future buyers must have the right to obtain information from the issuing company that is not known from the public channel;
(4) The seller must confirm that the buyer knows that the seller can waive the registration requirements of the securities law in accordance with the 144 A regulations.
Regulation 144A also sets out the conditions for qualified institutional investors. Qualified institutional investors typically include US banks, credit unions, and registered brokers.
4. Reverse merger
In recent years, Chinese private companies have been listed in the US through reverse Merger. Reverse merger, also known as Reverse Takeover (RTO), commonly known as backdoor listing, is a simplified and quick way to go public. It refers to a private company that merges with a listed company that has no business, assets and liabilities. Entering the listed company, the listed company becomes a brand-new entity.
The listed company is also known as the shell company. A private company holds a majority stake (usually 90%) after it is incorporated into a listed company.
Compared with IPOs, reverse mergers have the advantages of significantly lower listing costs, less time required, and higher success rate: once they become listed companies, the company's prospects are considerable; the market value of listed companies is usually much higher than the equivalent industry, equivalent Structured private companies; listed companies are more likely to raise funds because their stocks have market value and can be traded; stock buys can be used because publicly traded stocks are often considered as cash instruments for purchases.
However, reverse mergers are not a quick way to obtain funds, but they are only an indirect way to raise funds. Therefore, this approach is only suitable for those companies that are not particularly eager to meet the needs of funds. Companies that will take a long time to reach the size and level of listed companies will help them achieve their long-term financing goals.
 
    US listing benefits
    First, the multi-level diversification of the US securities market can meet the financing requirements of different companies. As can be seen from Table 2 above, in the US OTCBB (OTCBB) counter listing transaction (the transaction here is different from what we say in the strict sense of listing, not detailed here) does not have any business Requirements and restrictions, only three brokers are willing to make a market for this stock. Companies can buy shell transactions at OTCBB, raise the first funds, and meet the Nasdaq listing conditions to apply for an upgrade. Going to the NASDAQ.
    Secondly, the size of the US securities market is unmatched by Hong Kong, Singapore, and even any financial market in the world. This is mentioned when analyzing the Hong Kong market in China. When listed in the US, companies will undoubtedly have more funds than other markets.
    Finally, the US stock market's extremely high turnover rate, price-earnings ratio; a large number of hot money and venture capital; stocks advocating risk-taking investment awareness and other distinctive features are quite attractive to Chinese companies.
 
    Disadvantages of US listing
First, the geographical, cultural and legal differences between China and the United States. The reason why many Chinese companies do not consider listing in the United States is because there are huge differences in geography, culture, language and law between China and the United States. Enterprises will encounter many obstacles in the process of listing. Therefore, Wall Street seems to be a bit distant and unfamiliar to most Chinese companies.
    Second, companies have limited recognition in the United States. Unless it is a large or well-known Chinese company, the average Chinese company's recognition in the US capital market should be limited compared to Hong Kong or Singapore. Therefore, Chinese SMEs may face less awareness and less pursuit in the United States. However, this situation has changed in 2004 as the “Chinese concept” became more and more clear in the US securities market.
    Third, the listing fee is relatively high. If you choose to list IPOs in the US, the cost may be relatively high (about 10-20 million RMB, or even higher, and there is little difference between Hong Kong and China), but if you choose to buy a shell, the cost will be reduced.
    Comparison between US listing and Chinese domestic listing
    Domestic listing advantages:
    1. Enterprises listed on the local market should be able to say that they enjoy the advantages of time, location and people. Because at home, companies do not have to face a variety of language, regulatory and legal differences.
    2. If the company is listed on the local market, the recognition that can be obtained will be higher than that listed overseas. Because companies are listed in China, they are more likely to be understood and familiar by investors and get their approval.
    Domestic listing disadvantages:
    1. A lengthy review process. At the present stage in China, the company's listing is still subject to review. The enterprise submits a listing application to the China Securities Regulatory Commission, and the China Securities Regulatory Commission will review the listing qualification of the enterprise and qualify for listing. Due to the large number of companies applying for listing, the number of companies that the SFC has reviewed and approved for listing each year is limited to a certain amount, which has caused the company to go through a long process of waiting for review. As mentioned above, even in the SME board in the newly opened motherboard, the threshold for the listing of SMEs is slightly reduced, but it still needs to be reviewed and awaited. According to statistics, there are less than 100 companies listed in mainland China each year, and nearly 400 companies have been approved by the China Securities Regulatory Commission and are in line, and more companies are still applying to the CSRC.
    
    2. The listing threshold is high. The requirements for listing of companies as stipulated in the "Company Law", especially the requirements for equity, are unachievable by many SMEs. The newly launched SMEs sector, although serving small and medium-sized enterprises, has not lowered the threshold of listing or even lowered it.
    3. The listing fee is not cheap. In many corporate impressions, the cost of listing in China should be the lowest. But in fact, the cost of listing locally is not cheap. Based on the statistics of companies already listed, the average upfront cost of listing in China is about 15 million yuan, which is almost no different from the cost of listing in overseas capital markets such as the United States.
    Suitable for companies listed in China:
    Based on the above analysis of the conditions, advantages and disadvantages of listing in China, the enterprises suitable for listing in China are large enterprises, and the enterprises are not eager to develop funds and can accept the long-term review process. In view of the launch of the SME board in the main board, if SMEs can accept the queuing review, of course, the domestic listing is the best choice.
    Suitable for companies listed in the US:
    Whether it is a large Chinese company or a small or medium-sized private enterprise, the US listing should be suitable for them, because the multi-layered nature of the US capital market and the diversity of listing methods provide different services for different companies, making enterprises at all levels Listing in the US is feasible.