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 in the US, according to two people familiar with the matter.
The US Securities and Exchange Commission has said that about 200 Chinese and Hong Kong companies listed in New York will be forced to delist in 2024 if they do not comply with audit disclosure laws. Macau, a special administrative region of China, is not included in the delisting threat, opening the door to a potential 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,” said one of the people close to the company, referring to Chinese president Xi Jinping.
China has long prevented companies and auditors from disclosing audit details to foreign regulators over national security concerns. It is not clear if Beijing would permit foreign regulators to examine the audit files of companies based in Macau.
After the introduction of the Holding Foreign Companies Accountable Act in 2020, regulators can prohibit foreign companies from being traded in the US if the Public Company Accounting Oversight Board — the audit watchdog — is unable to inspect audits for three consecutive years.
In 2021, the PCAOB said China and Hong Kong were not in compliance, giving companies from those jurisdictions until 2024 to comply or be delisted in the US.
Macau-based companies audited by accounting firms outside China or Hong Kong could in theory continue trading because the PCAOB has not found the region in breach of the rules, according to a person close to the regulator.
To avoid being delisted, Melco would have to change its auditor to one based in the US that is able to be inspected by the PCAOB, one of the people close to the company said. Melco has been audited by the Hong Kong office of EY since 2017.
Melco did not comment following repeated requests.
The group, whose parent company has operated from Hong Kong since 1910, is one of six companies licensed to manage casinos in Macau, a gambling hub.
Its properties include the City of Dreams resort and casino in Macau, which includes the Morpheus Hotel designed by Zaha Hadid Architects. It raised $1.1bn when it listed on Nasdaq in 2006. Its parent company, Melco International, listed in Hong Kong in 1927.
Lawrence Ho, whose father Stanley held a monopoly on gambling in Macau for decades, took over Melco International in 2001 after a career in investment banking. He launched the subsidiary Melco Resorts in 2004.
The group’s shares have lost more than half their value this year after being pummelled by the threat of being delisted from Nasdaq and Beijing’s strict zero-Covid strategy.
Negotiations between the US and China on access to the audit files of Chinese groups listed in the US have reached a stalemate.
In April, China modified a decade-long rule that restricted the data-sharing practices of overseas companies in a concession to the US. However, it has not agreed to comply with Washington’s demand for access to full audits.
Additional reporting by Hudson Lockett in Hong Kong