NASDAQ proposes stricter listing rules for Chinese firms
What's the story
The NASDAQ stock exchange has proposed a new rule that could make it harder for small Chinese companies to go public in the US. Under the proposed changes, companies primarily operating in China would be required to raise at least $25 million in initial public offerings (IPOs) to list on the exchange. The decision comes amid ongoing tensions between the US and China and broader financial market issues facing NASDAQ.
Market manipulation
New rule response to 'pump and dump' IPO cases
Winston Ma, an adjunct professor at NYU School of Law, said the new rule is a response to some IPO cases of "pump and dump" due to small float size. The move comes after ride-hailing company Didi's New York listing in 2021 and a surge in smaller Chinese companies going public in New York. In 2024 alone, 35 small China-based firms listed there, twice as many as their US-based counterparts.
Industry perspective
Rule change to boost legitimacy of companies going public
Gary Dvorchak, managing director at Blueshirt Group, sees the rule change as a positive development. He believes it will boost confidence in the legitimacy of companies going public and reduce potential market manipulation. NASDAQ has also highlighted that Chinese listings pose a greater risk to US investors due to their inability to take legal action against potentially manipulative trading activities in these securities.
Information
Proposal pending approval from SEC
The proposal by NASDAQ is still pending formal approval from the US Securities and Exchange Commission (SEC). Companies already in the IPO process would have 30 days to complete it under prior rules, while all subsequent listings would have to comply with these changes.
Trade impact
NASDAQ's move comes amid escalating US-China tensions
Stephen Olson, a visiting senior fellow at the ISEAS-Yusof Ishak Institute, said NASDAQ's listing requirement is another example of the growing complexity in business and trade relations between the US and China. The New York exchange's rule change comes after Beijing announced new punitive tariffs on some US optical fiber producers. The move highlights China's readiness to retaliate against perceived unfair trade practices by Washington.