Breaking News
Investing Pro 0
New Year’s SALE: Up to 40% OFF InvestingPro+ CLAIM OFFER

Exclusive: Nasdaq to tighten listing rules, restricting Chinese IPOs - sources

Stock Markets May 18, 2020 10:00PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
2/2 © Reuters. People work in the client experience space at the Nasdaq Market site in New York 2/2
 
NDAQ
+0.65%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
LKNCY
-0.26%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 

By Echo Wang

NEW YORK (Reuters) - Nasdaq Inc (O:NDAQ) is set to unveil new restrictions on initial public offerings (IPOs), a move that will make it harder for some Chinese companies to debut on its stock exchange, people familiar with the matter said on Monday.

While Nasdaq will not cite Chinese companies specifically in the changes, the move is being driven largely by concerns about some of the Chinese IPO hopefuls' lack of accounting transparency and close ties to powerful insiders, the sources said.

At a time of escalating tensions between the United States and China over trade, technology and the spread of the novel coronavirus, Nasdaq's new curbs on Chinese IPOs represent the latest flashpoint in the financial relationship between the world's two largest economies.

Nasdaq also unveiled some restrictions on listings last year, seeking to curb IPOs by small Chinese companies. Their shares often trade thinly because most stay in the hands of a few insiders. Their low liquidity makes them unattractive to many large institutional investors, to whom Nasdaq is seeking to cater to.

The new tightening of the listing standards reflects the bourse operator's concerns about some Chinese companies seeking U.S. IPOs. Last month, Luckin Coffee (O:LK), which had a U.S. IPO in early 2019, announced that an internal investigation had shown its chief operating officer and other employees fabricated sales deals.

The new rules will require companies from some countries, including China, to raise $25 million in their IPO or, alternatively, at least a quarter of their post-listing market capitalization, the sources said.

This is the first time Nasdaq has put a minimum value on the size of IPOs. The change would have prevented several Chinese companies currently listed on the Nasdaq from going public. Out of 155 Chinese companies that listed on Nasdaq since 2000, 40 grossed IPO proceeds below $25 million, according to Refinitiv data.

Small Chinese firms pursue these IPOs because they allow their founders and backers to cash out, rewarding them with U.S. dollars they cannot easily access because of China’s capital controls. The companies also use their Nasdaq-listed status to convince lenders in China to fund them and often get subsidies from Chinese local authorities for becoming publicly traded.

The proposed rules will also require auditing firms to ensure that their international franchises comply with global standards, the sources said. Nasdaq will also inspect the auditing of small U.S. firms that audit the accounts of Chinese IPO hopefuls, the sources added.

U.S. President Donald Trump told Fox Business in an interview last week that he was looking "very strongly" at requiring Chinese companies that list in New York to follow U.S. accounting standards. But he noted that "the problem with that" was that Chinese companies could decide to list in London or Hong Kong instead.

The U.S. Securities and Exchange Commission (SEC) has been locked in a decade-long struggle with the Chinese government to inspect audits of U.S.-listed Chinese companies. The regulator’s accounting oversight arm, the Public Company Accounting Oversight Board (PCAOB), is still unable to access those critical records, it has said.

The PCAOB, which was set up by the 2002 Sarbanes-Oxley Act and is overseen by the SEC, is tasked with policing the accounting firms that sign off on the books of the nation’s listed companies. Its problems with Chinese audit quality have been festering since 2011, when scores of Chinese companies trading on U.S. exchanges were accused of accounting irregularities.

The SEC is planning to host a roundtable this summer for companies, auditors, advisers and other parties to discuss issues with IPOs of foreign companies and their accounting disclosures, one of the sources said.

Exclusive: Nasdaq to tighten listing rules, restricting Chinese IPOs - sources
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your investing.com profile, will be public on investing.com and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (7)
Tan Boon Chong
bCeye May 19, 2020 6:31AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
FTSE or Milan would be nice
Muhamed Jaffir
Muhamed Jaffir May 19, 2020 6:31AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I love that the Asian response to transparency is to find another exchange to scam. The yellow bug never changes.
Buzzy Jefferson
Buzzy Jefferson May 19, 2020 1:38AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Good. The US should do everything possible to keep Chinese companies from raising capital here. As the entire free world flees China, the data coming out of their markets, and the reporting by their "corporations" will become more suspect and desperate. If you have money invested in China, you may be wise to get it while you can. India and Mexico are good emerging markets. I would even invest in Vietnam at this point.
Kaveh Sun
Kaveh Sun May 19, 2020 12:44AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Wall street is full of frauds, companies that try to steal ur hard earn money.
Kaveh Sun
Kaveh Sun May 19, 2020 12:43AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
How about ban different classes. A share class that allows 1 guy who owns a few percent of the company, total control of the company is a fraud.
De Will
WhatMatters May 18, 2020 11:10PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Both the NASDQ and NYSE should require ALL listed companies, regardless of national origin, to comply with the same U.S accounting standards and audit scrutiny. Leveling the playing field promotes fair competition - an American ideal worth preserving.
Pete Palella
Pete Palella May 18, 2020 10:58PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
China always messing things up in this world!
Notvery Goodathis
Peteymcletey May 18, 2020 9:30PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Seems like a good move for any IPO.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email