China halts 42 companies from IPO, subjects them to investigation, further 'strict measures' announced
The China Securities Market Regulatory Commission (CSRC) launched an investigation into intermediary firms that were about to present IPOs of more than 40 companies for their IPO.
The Chinese government does not back down from regulatory efforts to increase its control over the private sector. In recent days, the China Securities Market Regulatory Commission (CSRC) has announced new measures that now lead to the suspension of the listing of more than 40 companies , while conducting an investigation of their intermediaries .
The Chinese regulator filed a lawsuit against investment bank China Dragon Securities Co. , Tian Yuan Law Firm , legal services company Zhongxingcai Guanghua Certified Public Accountants and CAREA Assets Appraisal , among others.
These firms are intermediaries for some 42 companies to present their Initial Public Offering (IPO) on the Shanghai and Shenzhen stock exchanges . Of course, all these processes were stopped while the investigation was being carried out.
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Since last August 19, the Shanghai Stock Exchange has held back around a dozen IPOs in the STAR sector, that is, companies focused on technology. A day earlier, on Wednesday August 18, the Shenzhen Stock Exchange suspended more than 30 IPOs.
Among the IPOs halted in Shenzhen, the public sale of shares of BYD Co. , a manufacturer of hybrid and electric vehicles, stands out. The company is also involved in the semiconductor and chip business , components that have been in short supply since last year.
Now the Chinese automaker capitalizes more than 116,000 million dollars and is listed on the US market through an American Depositary Receipt (ADR), a certificate that allows US investors to trade shares of companies whose companies were incorporated outside the United States, in stock markets of the country.
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The agency revealed its intention to control "with strict measures the entry into the capital markets" last Friday. He also noted that there will be a "zero tolerance" policy for behaviors that they consider to be "misconduct ."
On Monday, the Chinese authorities confirmed their intention to end financial fraud and counterfeiting . To this end, it will strengthen the control of accounting firms and supervision over the use that companies make of big data . In addition, they will create a blacklist of companies that, in their opinion, have carried out dishonest practices.
The United States does not make it easy for Chinese companies either
The United States Securities and Exchange Commission (SEC) issued new transparency measures for Chinese companies seeking to list on Wall Street . The goal would be for potential investors to have a better understanding of the risks involved.
The SEC itself has sent detailed information to some Chinese companies about the transparency requirements in the use of variable interest entities (VIEs) for IPOs and what this implies for investors. They also warn of the risk of Chinese regulators and / or authorities interfering with the company's operations.
Gary Gensler, the SEC chairman, called last July to put the IPOs of Chinese companies in the United States on a "pause" and called for more transparency.
"Describe how this type of structure can affect your investments, including how and why contractual arrangements may be less effective than direct ownership, and that the company may incur substantial costs to enforce the terms of the agreements," it was stated. read in a letter from the SEC cited by El Economista .
Some analysts speculate that these measures could be related to the intention of the Chinese government that the national companies go to the market first in the stock exchanges of the country.