Melco Resorts & Entertainment Ltd and its majority subsidiary Studio City International Holdings Ltd are among 12 ADR (American Certificates of Deposit) companies added to a provisional list of foreign companies subject to delisting by the United States Securities and Exchange Commission (SEC). United States. .
In a statement sent to Inside the Asian Game overnight, Melco said it was identified by the SEC after filing its annual report for the fiscal year ended Dec. 31, 2021.
At issue are new regulations, passed by the U.S. Securities and Exchange Commission (SEC) in January, that affect certain foreign companies.
Among the new stipulations contained in the Holding Foreign Companies Accountable Act (HFCAA), audits of listed companies must be carried out by firms subject to the inspection of the American Public Company Accounting Oversight Board (PCAOB). Melco’s auditor, Ernst & Young Hong Kong, was deemed by the PCAOB unable to inspect in Hong Kong jurisdiction.
Affected companies will be given a three-year countdown from this year to find a solution, and if no solution is offered, all non-compliant companies by 2024 will likely have to drop off the list.
Melco said overnight that it was “aware that the company was identified by the SEC as HFCAA on April 12, 2022,” but was not surprised to be added to the SEC’s listing.
“Melco has previously disclosed that its auditor, the independent registered public accounting firm that issued the audit report included in its annual report filed with the SEC, is in a jurisdiction currently listed as not fully capable of inspected by the PCAOB, and therefore the identification was awaited,” he said. “Melco will continue to closely monitor developments and explore options in relation to HFCAA.”
As previously reported by Inside the Asian GameBernstein brokerage outlined a number of options available to Melco.
“If no deal is reached, the solution would be for Melco to list on the Hong Kong Stock Exchange (HKSE) or potentially merge with 200.HK (parent company Melco International Development Ltd),” Bernstein said.
Regarding the possibility of Melco merging with its HKSE-listed parent company, the brokerage added: “This path is complex around the arm’s length valuation in the context of a merger and the residual ownership of Lawrence Ho. However, there is a scenario where such a transaction makes perfect sense and should certainly create shareholder value.