In the near future, the NASDAQ American Exchange is going to tighten its rules in such a way as to deny the possibility of an initial public offering (IPO) for about a third of Chinese companies that would like to enter it. This was told by Reuters interlocutors who are familiar with the situation.
According to them, the documents do not directly speak about the direction of the new requirements against Beijing, but they look like the United States came up with a way to deprive Chinese companies of the opportunity to get money on the American stock exchange.
The changes will affect the transparency of companies and the lack of relations with insiders, with which Asian and, in particular, Chinese companies are experiencing problems.
After their entry into force, NASDAQ debutants will need to raise at least $ 25 million, or a quarter of market capitalization after listing. This is the first time that the exchange has set a minimum IPO value. If it had acted before, then 40 of the 155 Chinese companies that have been listed on the stock exchange since 2000 would not have received this opportunity today.
The reason for this policy will be the practice of small Chinese companies that, under the guise of an IPO, cash out funds for founders and sponsors so that they receive them in dollars. In addition, they use NASDAQ registration to receive government subsidies and convince lenders to give them more funds.
For these purposes, the desire of US President Donald Trump is imposed to reduce the influx of American money into the Chinese economy. In particular, he already indicated that he would like to tighten reporting conditions for Chinese companies trading in New York to follow US standards. The White House also urged pension funds to abandon investment in Chinese companies.
Earlier it became known that Beijing is seriously considering the possibility of breaking the first part of the trade transaction. The Chinese authorities made concessions to the United States, including to increase investment in the country, and Washington’s current actions have outraged them. In addition, Beijing is dissatisfied with the US attempt to hold it responsible for the coronavirus pandemic and even demand compensation from around the world for damage to the global economy.