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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

Shanghai City 1
Shanghai, China

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 Chuxing 2
Didi Chuxing, China’s largest ride-hailing company

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:

Lawsuits / Fines / Losses:


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