Nasdaq to strict listing rules, restricting Chinese IPOs 

Nasdaq is going to unveil new restrictions on initial public offerings (IPOs). This move will make it harder for some Chinese companies to debut on its stock exchange. While Nasdaq will not cite Chinese companies specifically in the changes, the move is being driven largely by concerns about some of the Chinese IPO hopefuls’ lack of accounting transparency and close ties to powerful insiders.

Nasdaq also unveiled some restrictions on listings last year, seeking to curb IPOs by small Chinese companies. Their shares often trade thinly because most stay in the hands of a few insiders. Their low liquidity makes them unattractive to many large institutional investors, to whom Nasdaq is seeking to cater to.

The new tightening of the listing standards reflects the bourse operator’s concerns about some Chinese companies seeking U.S. IPOs. Last month, Luckin Coffee (LK.O), which had a U.S. IPO in early 2019, announced that an internal investigation had shown its chief operating officer and other employees fabricated sales deals.

The new rules will require companies from some countries, including China, to raise $25 million in their IPO or, alternatively, at least a quarter of their post-listing market capitalization.

The proposed rules will also require auditing firms to ensure that their international franchises comply with global standards, the sources said. Nasdaq will also inspect the auditing of small U.S. firms that audit the accounts of Chinese IPO hopefuls.