Chinese Firms Scramble To Beat New US IPO Rules

Chinese companies are rushing to launch U.S. initial public offerings (IPOs) before newly proposed rules that would expose the companies’ audits to scrutiny by American regulators can take effect, Nikkei Asian Review reported Monday (Aug. 10).

The potential value of the IPOs pushed forward quickly after President Donald Trump pitched the new rules last week exceeds $5 billion, the news organization reported. Among the IPOs cited are Chinese real estate company KE Holdings, which filed its U.S. IPO July 24. Also in the mix is Xpeng, a producer of electric automobiles.

If the rules proposed by President Trump or similar measures embraced by members of Congress from both major political parties take effect, existing Chinese companies listed on U.S. exchanges would have to allow greater transparency of their accounting. Trump’s proposal would apply to companies already listed on U.S. exchanges in 2022.

The news outlet reported additional companies that appear poised to launch U.S. IPOs soon include wealth management platform Lufax and data center-operator ChinData. Unnamed sources quoted by Nikkei indicated the two IPOs could raise a combined $2.5 billion.

Data from Dealogic cited by Nikkei Asian Review put the value of Chinese company IPOs in the United States at nearly $4 billion in 2019 and more than $8 billion in 2018 and nearly $4 billion in 2017. A Chinese company may want to list its stock on a U.S. exchange to gain easy access to U.S. investors.

The new rules proposed by Trump will only take effect after they are formally promulgated by the U.S. Securities and Exchange Commission. Some observers have speculated the president only put the rules forth to start negotiations around audits and any version could be ultimately enacted will be watered down.