Melco Resorts facing US delisting dilemma

Macau casino concessionaire Melco Resorts & Entertainment could face delisting from the NASDAQ due to new regulations governing some foreign companies that were adopted by the US Securities and Exchange Commission (SEC) in January.

The issue was outlined in a report from brokerage Bernstein on Monday, which noted that a number of Chinese American depositary receipts (ADRs) “took a beating” on Friday as investors dumped ADRs that could be subject to delisting in the future.

Among the primary worries for Melco are stipulations contained within the Holding Foreign Companies Accountable Act (HFCAA), which requires among other things that audits of listed companies must be conducted by firms subject to inspection by the US Public Company Accounting Standards Board (PCAOB). Melco’s auditor, Ernst & Young Hong Kong, has been deemed by the US Public Company Accounting Standards Board (PCAOB) to be unable to inspect in the Hong Kong jurisdiction, Bernstein said.

While there is no immediate risk of delisting, the HFCAA will result in a three-year countdown starting this year unless a solution can be found, with authorities in the US and China reportedly in discussions over the issue. If no solution is forthcoming, any companies not in compliance by 2024 will likely need to delist.

While such a scenario would be complex, Melco is not without options.

“If no agreement occurs, the solution would be for Melco to do a listing on the Hong Kong Stock Exchange (HKSE) or to potentially merge with 200.HK (parent company Melco International Development Ltd),” Bernstein said.

Source: https://www.asgam.com/index.php/2022/03/15/melco-resorts-facing-us-delisting-dilemma/