Huobi has bought a controlling stake in the public listed company, Pantronics Holdings. The latter is an electronics manufacturer based in Hong Kong. The Chinese crypto trading exchange is said to have acquired the listed firm via a backdoor listing agreement.
A backdoor listing can also be referred to as a reverse initial public offering (IPO) or can even be called a reverse takeover. It enables a private firm to buy a publicly traded organization while avoiding the public offering procedure. Such a procedure includes due diligence, regulatory issues and so on. Following the closing of such a deal, the buying company is automatically included on a stock exchange.
Transfer of shares
Pantronics Holdings filed shareholding disclosures on August 21, 2018. According to the disclosures, the electronics manufacturer has transferred over 221 million ordinary shares to various Huobi subsidiaries. The final price was agreed at $0.35 per ordinary share. Hence, the total value of the deal amounted to approximately $77 million.
Therefore, the Chines exchange acquired a total of 73.73% shareholding of Pantronics Holdings. As a result, Huobi becomes the controller of electronic goods producer. A controlling stake enables the Chinese firm to take over the listed company consequently entering the secondary financial markets. The listed firm had to temporarily halt the trading of its shares on the Hong Kong Stock Exchange’s (HKeX) main board. This was in conforming to the Hong Kong’s Takeovers and Mergers Codes, to allow for the crypto firm to make an offer.
Since the HKeX is yet to approve of the deal, Huobi has restrained from making any statement regarding the move. However, the exchange’s CEO, Li Lin stated that the speculation of his firm’s intention to conduct a reverse takeover was just a rumor. He said it would be difficult to operate a backdoor listing since the exchange is not yet fully compliant globally.
Meanwhile, the HKeX revealed in July, that it intends to review its listing regulations. It wants to strengthen the rules by enhancing the vetting process as well as the due diligence process. This will definitely affect backdoor listings but it is not meant to stop them.
Nevertheless, Lin was optimistic that conventional financial institutions will adopt the blockchain economy in the coming days.