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Chinese US IPOs Face SEC Rules As Stocks Plummet

The U.S. Security and Exchange Commission (SEC) is implementing new rules that require Chinese firms seeking New York listings to provide supplementary risk disclosure documents. At the same time, Chinese technology stocks are experiencing their worst month since the worldwide financial crisis.

Chinese tech stocks listed in New York dropped 22 percent this month, the biggest fallout since 2008, Financial Times reported on Friday (July 30), citing the Nasdaq Golden Dragon China index. Two of the country’s biggest tech companies saw big losses — Tencent fell 16 percent, while Alibaba lost 10 percent.

The declines follow a crackdown by Chinese officials into tech companies and private education firms in the country, in addition to the implementation of new laws over how Chinese companies go about listing on foreign stock markets, per FT.

At the same time, the SEC stated that Chinese firms can’t raise funds in the U.S. until they provide a detailed explanation about their legal structure and possible risk factors of any meddling by Beijing into their business affairs, Reuters reported.

SEC Chair Gary Gensler said he had also asked staff to “engage in targeted additional reviews of filings for companies with significant China-based operations,” per Reuters.

Before the recent developments, U.S. public listings by companies based in China hit $12.8 billion in 2021, a record, Reuters reported citing Refinitiv data.

The recent crackdown on tech firms by Chinese officials has cooled the IPO flames, a move that escalated after regulators pulled Didi’s apps from app stores and launched an onsite cybersecurity investigation, per Reuters and other media reports. Regulators have threatened Didi with penalties and a possible delisting from the New York Stock Exchange.

Chinese firms listing on U.S. stock markets started falling earlier this week after officials in China’s technology sector put a stop to startups accepting funds from outside investors. U.S.-listed Chinese stocks in the education space experienced a fallout when share prices dropped on the news.

 

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