Nasdaq 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 US 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 US IPOs. Last month, Luckin Coffee, which had a US 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 (Dh91.6m) in their IPO or, alternatively, at least a quarter of their post-listing market capitalisation, 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 are listed on Nasdaq since 2000, 40 grossed IPO proceeds below $25m, according to Refinitiv data.
Small Chinese firms pursue these IPOs because they allow their founders and backers to cash out, rewarding them with US 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 US firms that audit the accounts of Chinese IPO hopefuls, the sources added.
US 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 US 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 US Securities and Exchange Commission (SEC) has been locked in a decade-long struggle with the Chinese government to inspect audits of US-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 US 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.
GIANT REVIEW
Starring: Amir El-Masry, Pierce Brosnan
Director: Athale
Rating: 4/5
The specs
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liverpool youngsters
Ki-Jana Hoever
The only one of this squad to have scored for Liverpool, the versatile Dutchman impressed on his debut at Wolves in January. He can play right-back, centre-back or in midfield.
Herbie Kane
Not the most prominent H Kane in English football but a 21-year-old Bristolian who had a fine season on loan at Doncaster last year. He is an all-action midfielder.
Luis Longstaff
Signed from Newcastle but no relation to United’s brothers Sean and Matty, Luis is a winger. An England Under-16 international, he helped Liverpool win the FA Youth Cup last season.
Yasser Larouci
An 18-year-old Algerian-born winger who can also play as a left-back, Larouci did well on Liverpool’s pre-season tour until an awful tackle by a Sevilla player injured him.
Adam Lewis
Steven Gerrard is a fan of his fellow Scouser, who has been on Liverpool’s books since he was in the Under-6s, Lewis was a midfielder, but has been converted into a left-back.
Scorecard
Scotland 220
K Coetzer 95, J Siddique 3-49, R Mustafa 3-35
UAE 224-3 in 43,5 overs
C Suri 67, B Hameed 63 not out
What is blockchain?
Blockchain is a form of distributed ledger technology, a digital system in which data is recorded across multiple places at the same time. Unlike traditional databases, DLTs have no central administrator or centralised data storage. They are transparent because the data is visible and, because they are automatically replicated and impossible to be tampered with, they are secure.
The main difference between blockchain and other forms of DLT is the way data is stored as ‘blocks’ – new transactions are added to the existing ‘chain’ of past transactions, hence the name ‘blockchain’. It is impossible to delete or modify information on the chain due to the replication of blocks across various locations.
Blockchain is mostly associated with cryptocurrency Bitcoin. Due to the inability to tamper with transactions, advocates say this makes the currency more secure and safer than traditional systems. It is maintained by a network of people referred to as ‘miners’, who receive rewards for solving complex mathematical equations that enable transactions to go through.
However, one of the major problems that has come to light has been the presence of illicit material buried in the Bitcoin blockchain, linking it to the dark web.
Other blockchain platforms can offer things like smart contracts, which are automatically implemented when specific conditions from all interested parties are reached, cutting the time involved and the risk of mistakes. Another use could be storing medical records, as patients can be confident their information cannot be changed. The technology can also be used in supply chains, voting and has the potential to used for storing property records.
Shubh Mangal Saavdhan
Directed by: RS Prasanna
Starring: Ayushmann Khurrana, Bhumi Pednekar
So what is Spicy Chickenjoy?
Just as McDonald’s has the Big Mac, Jollibee has Spicy Chickenjoy – a piece of fried chicken that’s crispy and spicy on the outside and comes with a side of spaghetti, all covered in tomato sauce and topped with sausage slices and ground beef. It sounds like a recipe that a child would come up with, but perhaps that’s the point – a flavourbomb combination of cheap comfort foods. Chickenjoy is Jollibee’s best-selling product in every country in which it has a presence.
Tamkeen's offering
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