Chinese regulator questions Qihoo 360 over $7.5 billion listing

By Samuel Shen and Alexandra Harney

SHANGHAI (Reuters) - Chinese regulators are questioning anti-virus software maker Qihoo 360 Technology Co Ltd's disclosures in its planned $7.5 billion backdoor listing.

The Shanghai Stock Exchange sent a letter of enquiry to elevator maker SJEC Corp, Qihoo 360's listing vehicle, requesting more information about the software maker's business model, financial details and restructuring history, SJEC said in a statement on Saturday.

The scrutiny came a day after SJEC said it would acquire Qihoo 360 through an asset swap and injection which would allow the formerly New York-listed software firm to list on China's A-share market. Qihoo 360 was delisted from the New York Stock Exchange in July 2016.

The deal, which requires approval from regulators, is being watched as a litmus test for whether Beijing is relaxing curbs it imposed last year on A-share backdoor listings by overseas-listed Chinese companies.

Chinese regulators have increased their scrutiny of company disclosures since the 2015 stock market crash as part of efforts to better protect small investors.

In the letter of enquiry, which was published through an exchange filing, the Shanghai Stock Exchange asks how Qihoo 360 arrived at the conclusion that it controls 94.8 percent of China's PC anti-virus software market with monthly active users averaging over 500 million.

"Please disclose the data sources and methodology, and indicate if there were redundant calculations or dormant users."

Regulators also sought explanations for why Qihoo 360's earnings rose so rapidly during the first half of this year. The company reported one billion yuan in net profit during the January-June period, exceeding its full-year total of 744.4 million yuan in 2016.

The exchange also asked about the basis and rationale for Qihoo's forecast that its profit would surge over 70 percent to 3.8 billion yuan in 2019, from an expected 2.2 billion yuan this year.

In addition, the exchange raised questions about whether, after frequent restructuring over the past three years, Qihoo 360's ownership structure was sufficiently clear to qualify for a listing.

Reached by telephone, SJEC said there was no one available to answer questions regarding the statement over the weekend. Qihoo 360 executives did not immediately reply to a request for comment on Saturday.

(Editing by Stephen Powell)