Melco Resorts & Entertainment, a $2.5bn casino group run by Hong Kong casino mogul Lawrence Ho, is weighing relocating its headquarters to Macau to avoid being delisted within the US, in accordance to two individuals conversant in the matter.
The US Securities and Exchange Commission has mentioned that about 200 Chinese and Hong Kong firms listed in New York might be pressured to delist in 2024 if they don’t adjust to audit disclosure legal guidelines. Macau, a particular administrative area of China, isn’t included within the delisting risk, opening the door to a possible loophole.
“There are a few companies thinking this through right now, but the word is until the man upstairs opines, no one will make the move,” mentioned one of many individuals shut to the corporate, referring to Chinese president Xi Jinping.
China has lengthy prevented firms and auditors from disclosing audit particulars to overseas regulators over nationwide safety issues. It isn’t clear if Beijing would allow overseas regulators to look at the audit recordsdata of firms based mostly in Macau.
After the introduction of the Holding Foreign Companies Accountable Act in 2020, regulators can prohibit overseas firms from being traded within the US if the Public Company Accounting Oversight Board — the audit watchdog — is unable to examine audits for 3 consecutive years.
In 2021, the PCAOB mentioned China and Hong Kong weren’t in compliance, giving firms from these jurisdictions till 2024 to comply or be delisted within the US.
Macau-based firms audited by accounting corporations exterior China or Hong Kong might in concept proceed buying and selling as a result of the PCAOB has not discovered the area in breach of the principles, in accordance to an individual shut to the regulator.
To avoid being delisted, Melco would have to change its auditor to one based mostly within the US that’s ready to be inspected by the PCAOB, one of many individuals shut to the corporate mentioned. Melco has been audited by the Hong Kong workplace of EY since 2017.
Melco didn’t remark following repeated requests.
The group, whose guardian firm has operated from Hong Kong since 1910, is considered one of six firms licensed to handle casinos in Macau, a playing hub.
Its properties embody the City of Dreams resort and casino in Macau, which incorporates the Morpheus Hotel designed by Zaha Hadid Architects. It raised $1.1bn when it listed on Nasdaq in 2006. Its guardian firm, Melco International, listed in Hong Kong in 1927.
Lawrence Ho, whose father Stanley held a monopoly on playing in Macau for many years, took over Melco International in 2001 after a profession in funding banking. He launched the subsidiary Melco Resorts in 2004.
The group’s shares have misplaced greater than half their worth this yr after being pummelled by the specter of being delisted from Nasdaq and Beijing’s strict zero-Covid technique.
Negotiations between the US and China on entry to the audit recordsdata of Chinese teams listed within the US have reached a stalemate.
In April, China modified a decade-long rule that restricted the data-sharing practices of abroad firms in a concession to the US. However, it has not agreed to adjust to Washington’s demand for entry to full audits.
Additional reporting by Hudson Lockett in Hong Kong