Nasdaq New Rules Tend to Affect Chinese IPOs as Targeting on Restrictive Markets

Nasdaq Inc. is setting a new rule which tend to affect the initial public offerings (IPO) more difficult, particularly for Chinese firms. 

The regulation would request a company to raise fundraising minimum of $25 million in their IPO, or an amount equal to at least a quarter of their post-listing market capitalization. According to data compiled by Bloomberg, revealed that of the 29 Chinese companies that went public on the Nasdaq last year, 10 raised less than $25 million.

However, the proposed rules wouldn’t only apply to China, but the Chinese companies would be among the most affected.

Nasdaq’s proposal came after the accounting scandals of some Chinese biggest name firms on Wall Street and drawn the attention of the U.S. President Donald Trump. Last week he said that he was “looking at” Chinese companies that don’t follow American accounting law, while his administration moved to stop a federal retirement savings fund from investing in the Asian nation’s stocks. 

Raising debates about the actual tension level between these two nations in recent months across, whether it already deteriorates or still questioning.

“The latest news will likely be seen as a bit more pointed, showing a bit more teeth in terms of the U.S.-China trade tensions,” said Jingyi Pan, market strategist at IG Asia Pte.

The proposals targets companies from countries with restrictive markets that have national security or other laws restricting U.S. regulators’ access to information and China is one of four countries that Nasdaq names as having refused to share company financial records and details of audits with the Public Company Accounting Oversight Board, along with Belgium, France and Hong Kong where it concerns mainland Chinese companies.

Nasdaq will also require companies to have a member of either senior management or a director with relevant experience at a U.S. listed public company, or that they have hired advisers with similar experience.

Meanwhile, stock markets in China and Hong Kong have relaxed listing standards to entice more companies to go public closer to home.

“It is China that has a surplus of capital due to a high savings rate,” said Gary Dugan, chief executive officer at the Global CIO Office in Singapore. “Many of these younger companies can get funded from within.”

Back to top button