What’s the matter with Ctrip’s plan to delist? What is the market value of Ctrip?

Ctrip plans to delist

According to foreign media reports, people familiar with the matter revealed on Tuesday that due to the impact of the new coronavirus epidemic on Ctrip's business, the company is discussing with potential investors to provide financial support for its delisting from the Nasdaq stock market.

People familiar with the matter said that Ctrip's management has contacted many financial and strategic investors, including private equity firms and domestic technology companies, to discuss the company's privatization transaction. Based on Monday's closing price, Ctrip's market value is approximately US$16.5 billion.

Ctrip's privatization deal comes at a time when Chinese companies listed in the United States face stricter scrutiny and audit requirements from U.S. regulators. Many Chinese companies have abandoned listings in New York in favor of exchanges closer to their home market. However, the report also warned that Ctrip's delisting discussions are in the early stages and may change. The media has not previously reported on the news of Ctrip's privatization transaction. As of now, Ctrip has not commented on this report.

Data provided by Refinitiv shows that six Chinese companies listed in the United States have announced privatization transactions this year, involving a total amount of US$9.1 billion. However, the premium rate offered by buyers has dropped from an average of 42% last year to 22%. Reuters reported in May that Chinese internet search giant Baidu was considering delisting from the Nasdaq stock market.

Reuters reported in January that both Ctrip and Baidu have held preliminary talks with the Hong Kong Stock Exchange on a possible secondary listing. People familiar with the matter said that Ctrip decided to delist mainly because the COVID-19 epidemic severely hit its business in the first half of the year and put heavy pressure on its valuation.

In the first quarter of this year, Ctrip's net revenue fell 42% year-on-year; its net loss reached 5.4 billion yuan (about US$754 million). Ctrip said at the time that due to the continued impact of the epidemic on the company's business, it expected net revenue in the second quarter to decline by about 67% to 77% year-on-year. Ctrip’s stock price has fallen 17% so far this year. During the same period, the Nasdaq Golden Dragon China Index, which tracks China-related stocks, rose 22%.

However, Ctrip's diversified ownership structure will pose a challenge in gaining shareholder support for the delisting plan. According to its 2019 annual report, as of the end of last year, its largest shareholder Baidu held only 11.7% of the shares, and the second largest shareholder was Scottish fund Baillie Gifford with 7.7%. The annual report also showed that Ctrip co-founders Liang Jianzhang, Fan Min and other executives together hold 5.9% of the company's shares.

Ctrip was founded in 1999. Ctrip went public on the Nasdaq in 2003 as part of an early wave of Chinese technology companies going public in the United States, attracted by high valuations overseas.