Startup Legal Talks (11)

Are Chinese stocks cool? Why is Zoom not a Chinese stock? The most detailed breakdown in the history of global architecture construction of "Africa-China Concept Stocks"! Is there a way out for Chinese entrepreneurship to go public in the United States?

Everyone should also know that Chinese stocks are cold now, Chinese entrepreneurs are anxious, and even all startups that have taken money from Chinese investors are anxious. At this time, everyone's eyes were fixed on Zoom's founder, Yuan Zheng. Also has black eyes, black hair, yellow skin, and is a first-generation Chinese new immigrant. Yuan Zheng's company has not been identified as a Chinese concept stock. Since its listing in 2019, it has never been because of its "Chinese genes". Having been troubled by the US Securities Regulatory Commission, this time the Chinese stock market has cooled down, and it is fine at all.

So why is Zoom not a Chinese stock? How can Chinese entrepreneurs not be recognized as "Chinese stocks"? Today, let's take a look at the construction of the global structure of "non-Chinese stocks" using Zoom as an example.

1. What is "China Concept Stock"

To understand how the "non-China concept stocks" structure is built, we must first understand what China concept stocks are.

Let's take a look at concept stocks first. Concept stocks refer to stocks with certain special connotations, such as financial stocks, real estate stocks, securities companies, Olympic-themed stocks, asset restructuring stocks, etc., which are all called concept stocks. Concept stocks are generally pre-hyped speculation on the growth of the industry's operating performance.

The Chinese concept stock is a collective term for all Chinese stocks listed overseas because foreign investors are optimistic about China's economic growth. Generally speaking, Chinese concept stocks are the stocks of Chinese-registered companies listed abroad, or the stocks of companies that are registered abroad but whose business and relationships are in the mainland. Since Chinese concept stocks are relative to overseas markets, Chinese concept stocks may be listed in foreign countries, or may be listed both in China and abroad.

So how to distinguish Chinese concept stocks? First of all, I have listed some Chinese stock companies here. We can see that the stocks of the four Chinese stock companies, Sohu, Tencent, Bilibili, and Alibaba, are searched on Google. ADR". In fact, Chinese concept stocks listed in the United States do not trade company stocks, but ADRs. And ADR is an important symbol to distinguish whether it is a Chinese stock company.

So, what is ADR? The full name of ADR is American Depositary Receipts. Since securities not issued in the U.S. cannot be traded on U.S. stock exchanges, the shares of foreign companies cannot be directly listed and traded in the U.S., and Chinese companies that want to list in the U.S. do so through ADRs. As for the method of listing, here is a picture to show that American financial institutions first buy shares of Chinese companies that are going to be listed in the United States, and then issue depository receipts representing stocks through this institution, that is, ADRs, so American investors buy Not real shares, but depositary receipts.

2. Why is Zoom not a Chinese stock?

Next, we will discuss the relationship between Zoom and Chinese concept stocks. Why is Zoom not a Chinese concept stock?

Zoom Video Communications, Inc. is an American communications technology company founded by founder Yuan Zheng in 2011 and headquartered in San Jose, California. At the beginning of its creation, it was not called Zoom, but SaaSbee Inc., which was renamed Zoom Video Communications Inc. in 2012. It was listed on the Nasdaq Stock Exchange on April 18, 2019 under the ticker symbol ZM. Zoom provides video telephony and online chat services through a cloud-based peer-to-peer software platform for video communications (Meetings), messaging (Chat), voice calls (Phone), video conference rooms (Rooms), virtual events (Events) and contacts Center (Contact Center), and provides an open platform that allows third-party developers to build custom applications on its unified communications platform (Developer Platform).

This picture is the entrance of Zoom's US headquarters. It is worth emphasizing that Zoom is not only a company registered in the United States by its founder, but its main business is in the United States, and as of 2019, 82% of Zoom's revenue comes from North America. Therefore, although Yuan Zheng, the founder of Zoom, is a Chinese (Chinese), Zoom is an American company. In other words, to decide whether a company is a Chinese company or an American company, the key depends on whether the company's personnel, operations and market are in China or the United States.

In addition, by searching for Zoom Stock on Google, we can see that there is no "ADR" after the company name of Zoom, that is to say, Zoom is traded in the United States by issuing stocks rather than ADR depositary receipts. Therefore, Zoom is not a Chinese stock company.

Now we understand what is a Chinese concept stock and why Zoom is not a Chinese concept stock. So how do Chinese entrepreneurs build a structure similar to Zoom and successfully list in the United States? In the next issue, we will analyze the detailed steps for the construction of the global structure of non-Chinese stocks.