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Baidu May Become First US-Listed Chinese Company to Join CDR Scheme, Says Report

11/6 2018 15:15

China’s tech behemoth Baidu has selected Huatai Securities and Citic Securities as sponsors for issuing Chinese Depositary Receipts, CDRs, China Securities Journal learned from a person with knowledge of the matter. Baidu is expected to become the first company to return to China’s A-shares market from the Nasdaq stock market by issuing CDRs, the report said, citing the source.

China Securities Regulatory Commission, CSRC, made public Xiaomi’s CDR prospectus, which says the smartphone giant plans to issue CDRs on July 16. "Baidu should follow Xiaomi. It has not yet submitted an application to the CSRC, but it is preparing intensively," the insider said. "It is expected to be the first company to return to A-shares from the US through the issuance of CDRs.”

The stock should be priced according to Baidu's stock price on the NASDAQ, where an initial ratio of CDR to the underlying stock should be determined first, and then the base price of a CDR would be calculated, the source said.

As for the issuance size, the insider said since Baidu's main listing place is NASDAQ and that its equity structure is the variable interest entity, VIE, structure, the size of its CDR issuance is not expected to be too large. Due to the size of the company, a large number of issuance would have a certain impact on the market, and it would also dilute Baidu's stake to a certain extent, the source said, according to the report.

The first quarterly report of Baidu shows that the company achieved revenue of CNY20.9 billion (USD3.2 billion), a rise of 31 percent year-on-year, with net profit of CNY6.7 billion, up nearly four times from that of the same period a year earlier.