Nasdaq To Restrict Chinese Listings With New Strict IPO Requirements: Report

Nasdaq Inc. NDAQ is bringing in new restrictions on initial public offerings in a move to curb Chinese listings on its platform, Reuters reported Monday.

What Happened

The new rules that the Nasdaq Stock Market operator is considering will require companies based in certain countries, including China, to have raised at least $25 million in their IPO, or otherwise, at least a quarter of their post-listing market valuation, people familiar with the matter told Reuters.

Nasdaq will ask auditing firms to make sure their international franchises comply with global standards, according to Reuters. The rules will also bring small US-based auditors that will be reviewing the accounts of Chinese IPO-seeks under scrutiny.

The new rules will not specifically mention Chinese companies, but it is mostly being driven by multiple revelations on financial malpractices by several US-listed Chinese companies, according to Reuters.

Why It Matters

Nasdaq-listed Luckin Coffee admitted to the chief operating officer engaging in securities fraud earlier in April.

Citron Research founder Andrew Left, a long-term backer of Luckin, said the revelation shook the faith of U.S. investors in Chinese companies.

Muddy Water Research has expressed doubt about other companies, including Chinese Netflix Inc. NFLX competitor iQIYI Inc., IQ, and online educator GSX Techedu Inc. GSX.

Nasdaq shares closed 2.5% higher at $114.94 on Monday and inched further higher in the after-hours at $115.50.

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