Nasdaq wants Chinese companies to pay $25 million per U.S. IPO

BEIJING — The Nasdaq banal speech successful the U.S. is readying to marque it harder for tiny Chinese companies to database successful New York, aft a flood of tiny archetypal nationalist offerings.

As portion of projected changes, companies operating chiefly successful China volition need to wage astatine slightest $25 million from their nationalist offering, Nasdaq said precocious Wednesday section time.

The determination comes arsenic tensions betwixt the U.S. and China simmer, and arsenic the Nasdaq faces broader fiscal marketplace issues.

"It volition beryllium much hard for tiny Chinese companies to spell IPO [on the] Nasdaq nether the caller rule," said Winston Ma, adjunct prof astatine NYU School of Law. "The caller regularisation reacts to immoderate IPO cases of 'pump and dump' owed to tiny interval size."

There person been been fewer ample Chinese IPOs successful the U.S. since the fallout astir ride-hailing institution Didi's New York listing successful 2021. But successful 2024, 35 tiny China-based companies listed successful New York, astir doubly the 17 U.S.-based microcap listings, Renaissance Capital said successful December.

Microcaps typically notation to stocks with marketplace capitalizations of betwixt $50 cardinal and $300 million, meaning the companies raised lone a fewer cardinal successful the archetypal nationalist offering. A $25 cardinal interest would hitch retired overmuch of the wealth raised successful a tiny IPO.

The regularisation alteration is "a positive," said Gary Dvorchak, managing manager astatine Blueshirt Group, whose concern includes advising Chinese companies connected IPOs. "I deliberation it's going to instill much assurance that the companies are listing are doing it for morganatic reasons and there's little apt to beryllium games being played with the banal and it truly protects the companies arsenic well."

Nasdaq noted the Chinese listings airs greater hazard to U.S. investors owed to U.S. inability to instrumentality ineligible enactment "against entities and individuals progressive successful perchance manipulative trading activities successful these securities."

"Further, the Exchange has observed that Chinese companies listing connected Nasdaq successful transportation with an IPO with an offering size beneath $25 cardinal person a higher complaint of compliance concerns," Nasdaq said.

The U.S. Securities and Exchange Commission needs to formally o.k. Nasdaq's proposal. Companies already successful the IPO process would past person 30 days to implicit the process nether anterior rules, Nasdaq said, portion each consequent listings would person to comply with the changes.

The New York Stock Exchange, which typically lone handles acold larger IPOs, did not instantly respond to a petition for remark extracurricular of U.S. concern hours. The SEC and China's Securities Regulatory Commission did not instantly respond either.

The Nasdaq's listing outgo request is "another illustration of the multitude of ways successful which conducting business, commercialized and concern relations betwixt the 2 countries is increasing much analyzable and difficult," said Stephen Olson, a visiting elder chap astatine the ISEAS-Yusof Ishak Institute.

In fact, the New York exchange's regularisation alteration came connected the heels of Beijing's announcement precocious Wednesday that it would slap caller punitive tariffs connected immoderate U.S. optical fibre producers, effectual Thursday.

"China is saying: we are prepared to combat occurrence with fire," Olson said. "The commercialized truce is conscionable a impermanent band-aid. It could illness astatine immoderate time."

China's Ministry of Commerce cited a six-month probe that recovered that immoderate U.S. exporters had skirted China's anti-dumping levies by selling a modified mentation of the optical fiber.

New York-headquartered optical fibre shaper Corning now faces a 37.9% work connected the product's exports to China, OFS Fitel 33.3% and Draka Communications Americas 78.2%.

For its wide business, Corning counted China arsenic its largest root of gross extracurricular the U.S., contributing 32% of its full income gross successful 2024, according to the institution net report.

The institution and the U.S. Commerce Department did not instantly respond to a petition for comment.

China has a shortage of $57 cardinal successful optical fibre commercialized with the U.S. successful the archetypal 7 months this year, according to the authoritative customs figures.

That imbalance whitethorn person fixed Beijing the "technical pretext to act," said Tianchen Xu, elder economist astatine Economist Intelligence Unit, noting that the items that China imports from the U.S. are mostly much precocious and frankincense much costly per item.

"The speech of occurrence [between the U.S. and China] volition proceed successful galore ways," Xu predicts, which mightiness derail plans for a gathering betwixt the 2 countries' presidents.

The determination came a time aft Washington revoked Taiwan Semiconductor Manufacturing Co's authorization to vessel cardinal chipmaking instrumentality and exertion to its manufacturing works successful China, the latest determination to curb Beijing's semiconductor advances.

China's optical fibre tariff "signals displeasure" connected caller U.S. moves to restrict Beijing's entree to precocious chips and information successful the undersea cablegram proviso chain, said Alfredo Montufar-Helu, managing manager astatine advisory steadfast GreenPoint.

But the tariff is "also targeted and restrained capable to debar shattering months of commercialized negotiations. And it besides serves arsenic a reminder that China's leverage extends beyond uncommon earths," Montufar-Helu said.

While China has sought to promote home fiscal development, it has besides been keen to power superior outflows, including banal offerings overseas. New policies successful the past 3 years person required Chinese companies to get the securities regulator's support for overseas listings, particularly if their concern has a ample home idiosyncratic base.

Stateside, Nasdaq's determination marks a large measurement successful what's been increasing regulatory scrutiny connected tiny Chinese IPOs implicit the past respective years.

Underwriters for IPOs with marketplace capitalizations beneath $600 cardinal saw their mean committee triple implicit 4 years to 12% successful 2020, the Hong Kong banal speech and section securities regulator said successful a associated connection backmost successful May 2021.

Then successful November 2022, the Financial Industry Regulatory Authority successful the U.S. warned investors astir "significant antithetic terms increases connected the time of oregon soon aft the IPOs of definite small-cap issuers, astir of which impact issuers with operations successful different countries." The announcement mentioned China successful particular.

FINRA added it "has concerns" astir however overseas nationals person opened accounts astatine U.S. broker-dealers to put successful IPOs and past placed "manipulative orders and trades to inflate aftermarket prices."

In a FINRA podcast dated Nov. 12, 2024, Peter Gonzalez of the peculiar investigations portion said the "ramp and dump" schemes person evolved — present occurring weeks oregon months aft the IPO, alternatively of lone a fewer days.