China

Qihoo 360 Plans IPO in Mainland Through Reverse Acquisition of SJEC Corp

Summary:

  • Qihoo 360 (QIHU.NYSE) pans to conduct an IPO in the mainland market through a reverse acquisition of SJEC Corp (601313.SS), according to Tencent.
  • The shares of SJEC Corp remain in a trading halt.

Why It Matters:

  • Qihoo 360 completed a privatization in the U.S in mid-August 2016 and was thereby de-listed from the stock market . Since then, the company has actively been seeking an IPO in the Chinese local market to take advantage of the valuation gap between the U.S and China which was the major driver for the privatization.
  • However, Chinese regulations suddenly changed in the second half of 2016 and the China Securities Regulatory Commission (CSRC) has made it harder to conduct reverse acquisitions in order to launch an IPO. This has discouraged overseas listed companies from taking advantage of the valuation gaps between two markets.
  • The deal values Qihoo 360 at RMB 50.4 billion. After the reverse acquisition, Hongyi Zhou, the founder of Qihoo 360, will become the effective controlling shareholder of the company.