Monday, July 26, 2021
Martin Hennecke

Delist threat looms with oversight bill
The US Senate passed legislation that could lead to Chinese companies such as Alibaba (9988) and Baidu being barred from listing on US stock exchanges unless they comply with US audits and regulations standards. According to The Holding Foreign Companies Accountable Act, if a company can't show it is not under the control of a foreign government or the Public Company Accounting Oversight Board isn't able to audit the company for three consecutive years to determine it is not under the control of a foreign government, the company's securities will be banned from the exchanges. Stricter US oversight could potentially affect the future listing plans of major private Chinese corporations, from Jack Ma Yun's Ant Financial to SoftBank-backed ByteDance. But since discussions on increased disclosure requirements began last year, many other Chinese companies have either listed in Hong Kong already or plan to do so, said James Hull, a Beijing-based analyst and portfolio manager with Hullx. Stock market catastrophes like Luckin Coffee show US regulators and exchanges need to be more judicious in their embrace of China-based companies, says Carson Block, co-founder and chief investment officer at short-seller Muddy Waters. Meanwhile, Luckin Coffee is reported to be planning to lay off 500 employees in charge of research and development, or 50 percent of its staff at its Xiamen headquarters, mainland media reported.

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