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Nasdaq says IPOs by Chinese firms could pick up ‘dramatically’ as delisting fears ease

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The Nasdaq is expecting more Chinese companies to list on the U.S. exchange in the coming months as Beijing and Washington appear closer to resolving an audit dispute.

“We still have a pretty strong pipeline … as things are getting to become a little more clear in that market. We think that that market could pick up pretty dramatically,” said Bob McCooey, vice chairman of Nasdaq, who does business development in the Asia-Pacific, told CNBC on Wednesday.

The market for Chinese initial public offerings “pretty much [shut] down” in light of the Holding Foreign Companies Accountable Act and the noise around Chinese ride-hailing giant Didi Chuxing, he told “Street Signs Asia.”

Delisting risk for U.S.-listed Chinese companies sharply increased following the signing of the Holding Foreign Companies Accountable Act in late 2020.

The law allows the U.S. Securities and Exchange Commission to kick Chinese companies off American stock exchanges if American regulators are not able to review company audits for three years in a row.

Chinese ride-hailing giant Didi‘s announcement of plans to delist from the New York Stock Exchange in late 2021 — just six months after its U.S. IPO — also fueled investor concerns. Didi was subjected to a cybersecurity probe from Chinese regulators soon after its IPO. Didi also faced an investigation by the U.S. Securities and Exchange Commission.

I can say that it’s north of 50 companies that would like to come public on Nasdaq in the next 12 months.
Bob McCooey
vice chairman, Nasdaq

Some 30 Chinese companies went public on the Nasdaq in the first half of 2021, McCooey said.

In contrast, only two Chinese companies listed on the Nasdaq in the second half of that year, and one Chinese company debuted on the exchange from January to March this year, according to CNBC’s analysis of data from the U.S.-China Economic and Security Review Commission.

But things are looking up.

“I can say that it’s north of 50 companies that would like to come public on Nasdaq in the next 12 months,” McCooey said.

U.S.-China agreement

Washington and Beijing reached a deal in August to allow the U.S. to conduct inspections within China’s borders, a move that was seen as a positive step toward a solution to the audit dispute that escalated in recent years.

China sent regulators to assist inspectors from the U.S.’s Public Company Accounting Oversight Board in Hong Kong, Reuters reported last week, citing unnamed sources.

“I don’t want to jump the gun,” McCooey told CNBC. But if U.S. regulators are comfortable with the audit workpapers in Hong Kong, “that will take the risk out of [Chinese] companies being delisted.”

“We hope that everything goes smoothly and that in the next few months, we will have clarity and certainty that companies from China will continue to remain listed,” he said. “That will give confidence to other ones to come to the U.S. capital markets.”

Chinese companies listed on the Nasdaq include electric vehicle automaker Li Auto, e-commerce giant JD.com and tech company Baidu.

— CNBC’s Evelyn Cheng and Weizhen Tan contributed to this report.

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