More Obstacles for Chinese IPOs - Beijing Revises Rules

Sweeping new regulations are expected that will affect Chinese companies' efforts to raise capital both at home and abroad that may hinder some dozens of  high-tech initial public offerings--like mobile bike company Hello Inc. and Tencent-backed Spark Education.

The first half of 2021 saw more Chinese listings in New York than in the entire 2020: the total capital raise exceeded about $12.5 billion in January through June. And despite the alarm sounded by the Holding Foreign Companies Accountable Act, investor interest remained strong: many a company lifted off with fanfare. It's too bad the biggest Chinese IPO in New York since 2014, a $4.4 billion deal by Didi Global (NYSE: DIDI) last week, was a fiasco and the company now faces lawsuits for failing to disclose a warning from regulators to delay its IPO.

And now more obstacles are on the way that may hinder Chinese listings. As reported by the South China Morning Post, China's State Council has launched a revision of its market laws and is now tightening the caps.

The medium notes that the new rules, which are centered on data security, may slow the IPOs rather than end them. Innovative companies looking to American markets may now need time to review the revisions and make sure they adhere.

In addition to the two companies named above, SCMP also noted that Alibaba-backed LinkDoc Technology Ltd. could be among those affected. The IPO of the health tech platform is expected to take place on Friday and be worth up to $211 million. As of Wednesday afternoon, Nasdaq's official website still showed LinkDoc on its calendar for July 9.

The latest crackdown is yet another in a series of regulatory constraints Beijing has implemented against its high-tech companies, an effort that began in November 2020 with the halt on Ant Group's record-breaking IPO.

Meanwhile, Chinese tech conglomerates continue to receive fines from the watchdog, with another round reported today on Didi, Alibaba Group, and Tencent, among others, for failing to properly report merger and acquisition deals.