Key Takeaways:
China's securities regulator has been increasing its scrutiny of Chinese firms aiming to list in the U.S., asking questions on a growing number of topics
The scrutiny comes as the Nasdaq prepares to implement new rules that would also place tough new requirements on Chinese firms applying to list on the exchange
A road to the capital markets for many Chinese companies that once culminated with a listing on Wall Street is rapidly becoming a dead end.
Such new listings have slowed to a trickle lately, squeezed on both sides of the Pacific by increasingly tough regulatory scrutiny in both the U.S. and China. First the U.S. turned up the heat on small Chinese listings that have become the new norm by announcing restrictive new measures in September. Now, investment bankers are also complaining that new listing applications are coming under lengthy scrutiny by Chinese regulators.
"Many Chinese companies are seeking a U.S. listing, but the CSRC is choking the process," a Chinese IPO lawyer told Bamboo Works, referring to the China Securities Regulatory Commission, China's securities watchdog, which set up a filing system two years ago to vet all offshore share sales by Chinese companies.
Since much of the new scrutiny has only come in the last few months, the tough new climate has yet to show up in the data. The number of Chinese IPOs on U.S. exchanges jumped 54% during the first nine months of this year to 57. Most of those came from small companies raising $20 million or less, with the result that the average IPO fundraising amount slumped 18%, according to Deloitte.
An IPO banker said most of the U.S. listings by Chinese firms so far this year came from deals that were previously approved. Meantime, the number of new U.S. listings being approved by the CSRC is slowing to a crawl due to the regulator's slow acceptance and vetting of applications. "One of my clients waited for two years and his patience is wearing thin," the banker said.
Deal volume comes back, but fundraising lags
China clamped down on overseas listings in 2021 after Chinese ride-hailing firm DiDi Global went public in New York despite objections by Beijing. Activities ...
