Perhaps soon Chinese Internet giants will no longer be able to conduct IPOs in the United States. This initiative was taken by the Chinese authorities. They proposed to close access to the American stock exchange to all companies that have access to a large amount of data from Chinese users.
This is reported by The Wall Street Journal with reference to people familiar with the issue. According to the newspaper, the authorities have already told individual companies and international investors about the upcoming changes.
Officials warned that first of all, the new rules will affect those companies that want to conduct an IPO through divisions registered outside China. The authorities noted that Internet giants often try to circumvent restrictions on receiving foreign investments in this way. For example, Tencent, Alibaba and Didi followed a similar practice.
It is unclear how these requirements will affect companies that have already entered the American stock exchange. According to Bloomberg, only from January to July 2021, 37 Chinese companies conducted IPOs in the United States and raised $12.9 billion in total. Perhaps this will force them to conduct a secondary listing on the Hong Kong Stock Exchange, as Baidu did.
Also, the authorities did not explain what should be understood by “a large amount of user data”. However, when in July they talked about a similar tightening of the rules, it was about companies that store the data of at least a million people.
Recall that since July, all the technology giants of the Celestial Empire are required to take permission for an IPO abroad from the Cyberspace Administration of China. Because due to the entry of companies on a foreign exchange, “confidential information of residents of the country may be affected, controlled and maliciously used by foreign governments.”
The constant tightening of the rules affects the value of shares of Chinese companies. According to Kommersant, Alibaba shares have fallen by a third since the beginning of the year, and Tencent — by 18.5%.