Nasdaq Sets a Minimum Value on IPO Size, Small Chinese Companies May Be Affected

May 19, 2020 10:56 am

Beijing (PingWest)—Nasdaq is set to unveil new restrictions on initial public offerings (IPOs). The new rules will require companies from some countries, including China, to raise $25 million in their IPO or, alternatively, at least a quarter of their post-listing market capitalization, Reuters reported, citing sources familiar with the matter.

The tightening of listing standards reflects Nasdaq's concerns about some Chinese companies seeking IPOs in the US. Last month, Luckin Coffee, which went public in the US in early 2019, announced that its chief operating officer and other employees fabricated sales transactions.

Therefore, other high-profile US-listed Chinese companies, including Baidu-backed video streaming site iQiyi and tutoring company TAL Education, have come under scrutiny in the last several weeks.

Drew Bernstein, co-chairman of MarcumBP, which audits and advises pre-IPO and public Chinese companies, told CNBC that Chinese issuers were already under close scrutiny before the Luckin disclosure, and he expects auditors will be tougher, likely revealing more cases of financial fraud.

In addition, political pressure also exists. Previously, on May 14, in an interview with Fox Business, US President Donald Trump said he was “looking at” Chinese companies that trade on ⁦the NYSE and Nasdaq exchanges but do not follow US accounting rules.

This is the first time Nasdaq has set a minimum value on the size of IPOs. It will prevent small Chinese companies, which seek to cash out for their founders and supporters, from going public on Nasdaq.