As Beijing and Washington have seemed nearer to trying to resolve an audit disagreement, the Nasdaq expects more Chinese companies to list on the US exchange in the coming months.
“We still have a pretty strong pipeline … as things are getting to become a little more clear in that market. We think that that market could pick up pretty dramatically,” said Bob McCooey, vice chairman of Nasdaq, who does business development in the Asia-Pacific, said.
According to “Street Signs Asia,” the market for Chinese initial public offerings has “pretty much [shut] down” as a result of the Holding Foreign Companies Accountable Act and the controversy surrounding Chinese ride-hailing giant Didi Chuxing.
Following the signing of the Holding Foreign Companies Accountable Act in late 2020, the risk of delisting for US-listed Chinese companies increased dramatically.
The law gives the U.S. If American regulators are unable to review company audits for three years in a row, the Securities and Exchange Commission will delist Chinese companies from American stock exchanges.
Didi announced plans to delist from the New York Stock Exchange in late 2021, just six months after its U.S. listing. Investors were also concerned about the IPO.
Chinese regulators launched a cybersecurity investigation into Didi soon after its IPO. The US government was also looking into Didi. The Securities and Exchange Commission (SEC).
According to McCooey, 30 Chinese companies will go public on the Nasdaq in the first half of 2021.
According to analysts who estimated data from the US-China Economic and Security Review Commission, only two Chinese companies listed on the Nasdaq in the second half of that year, and one Chinese company debuted on the exchange from January to March this year.
But things are improving.
“I can say that it’s north of 50 companies that would like to come public on Nasdaq in the next 12 months,” McCooey said.
In August, Washington and Beijing agreed to allow the US to conduct inspections within China’s borders, which was viewed as a positive step toward resolving the audit dispute that had erupted in recent years.
According to Reuters, which cited unnamed sources, China dispatched regulators to Hong Kong to assist inspectors from the United States’ Public Company Accounting Oversight Board.
“I don’t want to jump the gun,” McCooey told CNBC. But if U.S. regulators are comfortable with the audit workpapers in Hong Kong, “that will take the risk out of [Chinese] companies being delisted.”
“We hope that everything goes smoothly and that in the next few months, we will have clarity and certainty that companies from China will continue to remain listed,” he said. “That will give confidence to other ones to come to the U.S. capital markets.”
Among the Chinese companies listed on the Nasdaq are electric vehicle manufacturer Li Auto, e-commerce behemoth JD.com, and technology firm Baidu.
(Adapted from Reuters.com)