The Securities and Exchange Commission (SEC) will require additional disclosures from Chinese companies seeking to list on US stock exchanges, after Beijing’s intensified crackdown on overseas stock offerings, according to a statement Friday.
SEC President, Gary Gensler, said: “In light of recent developments in China and the general risks for established companies in China, under the structure [كيانات المصالح المتغيرة] It required employees to seek certain disclosures from third-party issuers associated with China-based operators before making their registration data public.”
He knows alleged shifting interest entities of a structure used by big Chinese companies such as Alibaba and JD.com to go public in the United States while evading censorship from Beijing as the state does not allow direct foreign ownership in most cases. These entities with changing interests allow companies operating in China to set up offshore shell companies in another jurisdiction and issue shares to public shareholders.
Gensler said he was concerned that “regular investors may not realize that they own stock in a shell company rather than a China-based operator.”
The SEC will require Chinese companies to clearly distinguish between shell company management services and an operating company, citing any risks from future actions from the Chinese government.
The move came as Beijing strengthened its control over the flow of Chinese companies’ listings on international stock exchanges, the latest of which was the Didi app, which became the latest victim of the crackdown. The stock has fallen nearly 30% this month after Beijing announced a cybersecurity investigation and suspended new user registrations.
The tensions between the two countries could be a major blow to Chinese companies, which have demanded a New York listing in recent years. Data from Renaissance Capital showed that in 2020, 30 Chinese IPOs in the United States raised the largest capital since 2014.
There were at least 248 Chinese companies listed on 3 major US exchanges with a total market capitalization of $2.1 trillion, according to the US-China Economic and Security Review Commission. There are 8 Chinese state-owned companies listed in the United States.