The $2.5-billion casino group Melco Resorts and Entertainment owned by Lawrence Ho, one of the best-known gambling magnates, is considering a potential relocation of its headquarters to Macau. As revealed by two people close to the matter, the measure is being weighted as something that would help the company avoid being delisted in the US.
The US Securities and Exchange Commission has previously revealed that about 200 Hong Kong and Chinese companies listed on the New York Stock Exchange are set to be forcibly delisted in 2024 in case they do not comply with local audit disclosure laws. For now, the special administrative region (SAR) of Macau and companies headquartered there have not been included in the delisting measure, which pretty much opens a potential loophole allowing some businesses to circumvent the US Government measure.
Following the introduction of the Holding Foreign Companies Accountable Act a couple of years ago, regulators can suspend foreign operators from being traded in the US in case the audit regulator – the Public Company Accounting Oversight Board (PCAOB) – is not able to inspect audits for 3 years in a row.
China, on the other hand, has long prevented both investigators and companies from disclosing audit details to foreign regulatory bodies, citing concerns for its national security as the reason. For the time being, it remains unclear whether the Chinese Government would allow foreign watchdogs to access and examine the audit files of gambling operators based in Macau.
Operators Based in China and Hong Kong to Be Delisted from the US Due to Lack of Compliance
Last year, the PCAOB revealed that both Hong Kong and China were not in line with the rules. The watchdog provided companies based in those jurisdictions time until 2024 to comply, saying that in case they do not do so, they would be delisted in the US.
According to an unnamed person familiar with the regulatory process, in theory, the restrictions do not apply to companies based in Macau and audited by accounting firms outside Hong Kong and China and such operators could continue trading because they have not been in the region in breach of the rules.
Now, in order to avoid being delisted from the New York Stock Exchange, Melco Resorts and Entertainment is considering a potential change in its auditor to one based in the US, so that it is subject to inspection by the PCAOB, as confirmed by one of the sources close to the gambling operator. The company’s audits have been carried out by the Hong Kong Office of Ernst & Young Global Limited since 2017.
The group, whose parent company has operated from Hong Kong for more than a century, is one of the six gambling businesses that hold a casino operating license in Macau. The properties run by it include the iconic City of Dreams and casino in Macau, along with the Morpheus Hotel. Once being part of late Stanley Ho’s gambling monopoly in the special administrative region, Melco Internation was taken over by Lawrence Ho, Mr. Ho’s son, in 2001, with Melco Resorts being launched as a subsidiary to this company three years later.