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China Regulator Said to Cap Valuations for Companies Coming Home

  • Reverse mergers bring formerly overseas-traded firms to China
  • Valuations capped at 20 times forecast profit for stability

China’s stock regulator is capping valuations for some reverse mergers, a listing method favored by companies that previously traded overseas, people with knowledge of the matter said.

The China Securities Regulatory Commission decided that reverse mergers involving companies formerly listed on a foreign bourse can’t be valued at more than 20 times forecast profit, according to the people. The valuation is calculated from the listed company’s estimated earnings following the deal, one of the people said, asking not to be identified...