Spotlight casts shadow on domestic back-door listings

Plans by overseas-listed Chinese companies to relist on the A-share market are likely to face growing uncertainty, after the Chinese securities regulator said it is turning the spotlight on reverse mergers.

Market analysts say their hopes of returning to the Chinese mainland stock market have been dampened after the China Securities Regulatory Commission said it is conducting in-depth analysis of those looking to take control of listed shell companies, often called back-door listings, to avoid the lengthy process of an initial public offering.

Bloomberg quoted industry sources on Tuesday that the securities regulator was weighing up possible restrictions, including capping valuation multiples for reverse mergers involving companies that previously traded overseas.