The Nasdaq Stock Market has quietly stopped the listings of small-cap Chinese companies, holding up their approvals as the exchange further examines the companies after a number of enormous gains and big falls for some other Chinese listings this year.
The Nasdaq is said to be delaying approval letters and asking for about more information about related parties in deals, according to a WSJ report on Saturday.
The exchange has told lawyers in recent weeks that new listings of small-cap companies were being subjected to longer reviews and approvals were halted until further notice, the WSJ reported. The Nasdaq also asked for details about investors that have been allocated shares in initial public offerings.
The report comes after several small companies shares have soared on their first day of trading and weeks after, most notably Hong Kong-based fintech company AMTD Digital Inc. ( NYSE: HKD ), which gained 152% in its first day and skyrocketed 15,000% from its mid July IPO t o early August. The shares have since plunged 98%.
Addentax Group ( NASDAQ: ATXG ) shares soared nearly 9,000% following the Chinese garment maker's uplisting to Nasdaq and $25M initial public offering on Aug. 31. The shares have fallen 99.6% since then.
And Hong Kong-based financial services company Magic Empire Global ( NASDAQ: MEGL ) skyrocketed in its public debut, f inishing higher by more than 2,000% in its first day of trading. The stock has since cratered 97%.
More than a dozen applications of small-cap IPO applications, including finance and tax adviser Lichen China Ltd. and Japanese property developer Lead Real Estate Co., have been halted for weeks as the Nasdaq hasn't issued approval letters, according to the WSJ report, which cited people familiar.
The Nasdaq focus on the China small-cap listings comes as China and the U.S. have been sparring since the Securities and Exchange Commission has threatened to delist companies that fail to allow U.S. regulators to review their company audits for three-straight years, a rule that went into effect in late 2020.
The U.S. and China announced a preliminary agreement to let U.S. auditors have access to New York-listed Chinese firms last month.
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Nasdaq is said to halt small-cap Chinese IPOs after price spikes