China Increased Scrutiny on Foreign IPOs & Tech Giants, Requires Pre-Approval for Offshore IPOs

China Increased Scrutiny on Foreign IPOs & Tech Giants, Requires Pre-Approval for Offshore IPOs

10th July 2021 | Hong Kong

China is increasing its scrutiny and oversight on Chinese companies seeking foreign listing (IPO) and technology companies, requiring Chinese companies to seek approval for foreign IPO and to undergo cybersecurity review.  Chinese companies with more than 1 million users must apply for cybersecurity approval as the data and personal information could be exploited by foreign governments.  In November 2020, Alibaba’s Ant Financial Group $300 billion IPO was halted by China’s regulator and just after Didi Global IPO on the 30th June 2021, Chinese authorities instructed app stores to disallow new users from downloading Didi’s app in China (4th July 2021), causing the share price to decline 14% (9/7/21) since IPO and with Didi Global now facing a potential class action lawsuit for misleading investors (9th July 2021).  (IPO ~ Initial Public Offering) View China Official Statement: The Statement (Chinese)

“ China Increased Scrutiny on Foreign IPOs & Tech Giants, Requires Pre-Approval for Offshore IPOs “

China Increased Scrutiny on Chinese Companies, Technology Firms

Chinese companies that have listed abroad have used the Variable Interest Entity (VIE) to enable foreign ownerships and allowing the onshore company to transfer profits to an offshore vehicle with shares owned by foreign investors.

The new rules could impact companies such as TikTok (ByteDance) potential IPO.   Chinese technology stocks Didi Global, Alibaba, Tencent, JD.com, Bilibili and Meituan’ share prices immediately declined.  

In November 2020, Ant Group planned IPO that will raise $34.5 billion and create a Chinese financial technology giant with more than $300 billion market capitalization, was suspended by both Shanghai and Hong Kong Exchange. China regulators have reported Ant Group have failed in major issues including meeting listing conditions and information disclosure requirement.

In May 2021, Alibaba Group posted its first quarterly loss since IPO in 2014 with $1.17 billion losses for Q1 2021.  The Q1 2021 earnings was hit by a $2.78 billion fine in April 2021 by China’s State Administration for Market Regulation Anti-monopoly Law, representing around 4% of Alibaba’s 2019 revenue.

Didi App Download Suspended in China, Faces Lawsuit for Misleading Investor

Didi Global, China’s largest ride-hailing service and the world’s largest mobility technology company, has its Didi’s app suspended from downloads in China for data violation.  On 4th July 2021, just days after Didi Global IPO (30/6/21), Chinese authorities instructed app stores to disallow new users from downloading Didi’s app in China.  The suspension caused Didi Global share price to decline 14% (9/7/21) since IPO and with Didi Global now facing a potential class action lawsuit for misleading investors (9th July 2021).

Related:

• China Regulator Issues Warning on Stock Market Manipulation, Crackdown on Bitcoin
• Didi App Download Suspended in China, Faces Lawsuit for Misleading Investor
• Alibaba First Quarterly Loss with $1.17 Billion Since IPO, Hit by Anti-Monopoly Fine of $2.78 Billion
• Alibaba Fined $2.78 Billion by China State Regulator for Anti-Monopoly Practices
• Ant Group $300 Billion Record IPO Suspended in both Shanghai and Hong Kong Exchange
• 150 Stocks Suspended Trading on Hong Kong Stock Exchange for Missing Filing Deadline
• Hong Kong SFC: Police Arrested 12 People Suspected of Ramp & Dump Manipulation Schemes
• Hong Kong SFC Issues Restriction Notices to 13 Brokers for 54 Accounts Related to Social Media Scam
• Hong Kong & Singapore Regulators Warn Investors of Increased Trading Risks Triggered by Social Media & Online Forums
• Hong Kong SFC Warns of Investment Scams on Social Media Platforms
• Singapore Exchange Issues Alert on Stocks Trading Scam in Chat Groups

Lawsuits / Fines / Losses:

• Donald Trump Files Class Action Lawsuits Against Tech Giants and CEOs of Facebook, Twitter and Google
• United States Billionaires Tax Leak, Top 25 Pays 3.4% in Tax Rate from $401 Billion Fortune
• $20 Billion Archegos Leveraged on GSX Techedu & Founder Loses $14 Billion, Name Change to Gaotu on NYSE
• Swiss Private Bank Julius Baer to Pay $79.7 Million Fine for Laundering $36 Million of FIFA Football Bribes
• Nomura, UBS and Unicredit Fined $451 Million for Rigging European Bond Prices
• Alibaba First Quarterly Loss with $1.17 Billion Since IPO, Hit by Anti-Monopoly Fine of $2.78 Billion
• United States SEC Fines Under Armour $9 Million for Misleading Investors on Revenue Growth in 2015
• Alibaba Fined $2.78 Billion by China State Regulator for Anti-Monopoly Practices
• United States SEC Gives Record $114 million to a Single Whistleblower
• Goldman Sachs to Pay $3.9 Billion to Malaysia to Resolve 1MDB Criminal and Regulatory Proceedings