The U.S. Securities and Exchange Commission (SEC) has stopped processing registrations of U.S. initial public offerings (IPOs) and other sales of securities by Chinese companies.
Reuters news agency is reporting that the SEC is developing new guidance for disclosing to investors the risk of an ongoing regulatory crackdown by the Chinese government in Beijing.
Chinese listings in America have reached a record $12.8 billion U.S. so far this year, according to Refinitiv data, as companies capitalize on the U.S. stock market reaching record highs.
However, deal flow slowed substantially in July after Chinese regulators banned ride-sharing giant Didi Global from signing up new users just days after its blockbuster debut on the New York Stock Exchange. They followed up with crackdowns on other technology and private education companies.
The SEC is asking Chinese companies not to submit any registrations for the issuance of securities until it gives them specific guidance on how to disclose the risks they face within China.
The SEC's move represents the latest effort by U.S. regulators against corporate China, which has frustrated Wall Street for years with its reluctance to submit to U.S. auditing standards and improve the governance of publicly traded companies.
The SEC has been under pressure from U.S. lawmakers to take a tougher line on Chinese companies that are listed on U.S. stock exchanges. A group of senators including Republicans John Kennedy and Bill Hagerty wrote to SEC Chair Gary Gensler this week urging “thorough investigations of U.S. listed Chinese companies' concerning lack of transparency.”
Currently, 418 Chinese companies are listed on U.S. stock exchanges, according to Refinitiv data. The S&P/BNY Mellon China Select ADR Index, which tracks the American depositary receipts of major U.S.-listed Chinese companies, has lost 22% of its value year-to-date, compared to an 18% rise in the S&P 500 index.
No major U.S. IPO of a Chinese company is in the works following Didi, as the business community in China tries to come to grips with the current political environment.
