Razer (RAZFF) Is About To Go Private in a Matter of Days as Its Shares Are Slated To Delist From the Hong Kong Stock Exchange in May 2022

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This is not investment advice. The author has no position in any of the stocks mentioned. WCCF TECH INC has a disclosure and ethics policy.

Razer (RAZFF), a retailer of gaming peripherals, just took a major step toward delisting its shares from the Hong Kong stock exchange, paving the way for the company to become a private entity.

As a refresher, Razer had announced a privatization deal back in December 2021 that would value the company at $3.17 billion, based on the offer of HKD 2.82 ($0.36) per share and corresponding to a premium of just 5.6 percent relative to Razer's closing price on the 01st of December 2021.

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The company is taking the "scheme of arrangement" route to privatization, where the offeror – in this case, a consortium led by Razer's co-founders Tan and Kaling Lim, who jointly own 57 percent of the company, as well as the private equity firm CVC Capital Partners – requests the listed company to place the scheme of arrangement before other shareholders (collectively known as the scheme shareholders), asking them to surrender their shares at the offer price. This procedure requires the approval of at least 75 percent of the voting rights associated with the scheme shareholders and is subject to sanction from a competent court.

This brings us to the crux of the matter. Razer held a court meeting and a general meeting of its shareholders today. Accordingly, "the resolution proposed at the court meeting to approve the scheme was duly passed."

Crucially, as per the company's statement, the scheme is expected to become effective on the 11th of May, with the delisting of Razer's shares currently slated for the 13th of May:

"Subject to the Proposal becoming unconditional and the Scheme becoming effective, the withdrawal of the listing of the Shares on the Stock Exchange is expected to take place with effect from 9:00 a.m. on Friday, 13 May 2022."

As to the reason behind this drastic step, Razer is expected to relist its shares in the US, thereby gaining exposure to the higher tech valuations on American exchanges. Of course, the company could have pursued a dual listing. However, given the recent clashes between the Chinese and American regulators on the audit of China-based companies listed on American exchanges, where a failure to comply with US audit rules would allow the SEC to delist companies declared to be in violation of the said rules, Razer seems to have taken the more prudent route by eschewing its Asian roots to become an American entity.

Today's development comes as Razer's annual revenue continues to register growth, albeit at a slower pace. As an illustration, the company had reported $1.62 billion in revenue for the entire FY 2021, corresponding to a growth of over 33 percent relative to the top-line metric of $1.21 billion in 2020.

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Of course, Razer also continues to be a magnet for controversies. For instance, Razer had falsely marketed its Zephyr and Zephyr Pro with the N95 branding, equating an "N95 grade filter" with a medically-validated N95 mask.

Moreover, back in 2019, Razer came into the spotlight for its toxic work culture, where Tan was described by 14 former employees in an expose' as a tempestuous and volatile boss:

"Razer looks like this cool place to work, but when you get in there, you realize you're fighting for your life all the time. Either you're working hard, or you're being told to bugger off."

Do you think Razer will be more successful as a US-listed company? Let us know your thoughts in the comments section below.

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