China seeks to ban data-rich firms from US IPOs: Dow Jones

Beijng has since July all but frozen the once-thriving pipeline of United States IPOs by Chinese firms.
Beijng has since July all but frozen the once-thriving pipeline of United States IPOs by Chinese firms.PHOTO: REUTERS

HONG KONG (BLOOMBERG) - China will propose new regulations to block companies with large amounts of sensitive consumer data from floating shares in the United States, Dow Jones reported, citing people familiar with the matter.

China's stock market watchdog has told companies and investors that the envisioned rules will prohibit firms from listing abroad, particularly those seeking a foreign initial public offering (IPO) via overseas-incorporated entities.

Sectors with less sensitive information, such as pharmaceuticals, remain likely to win approval for an IPO, Dow Jones reported.

The regulations could be finalised and implemented only around the fourth quarter, so the agency has asked some companies to suspend IPOs till then, the newspaper added.

Beijng has since July all but frozen the once-thriving pipeline of US IPOs by Chinese firms. That month, the powerful Internet industry overseer launched a cyber-security probe into Didi Global and decreed that any company holding data on more than a million users now needs its approval when seeking listings in other nations.

That marked one of the most concrete steps taken yet to restrain the ability of technology firms to raise capital in the US through a so-called variable interest entity - an overseas-incorporated body - that the likes of Alibaba Group Holding to Baidu and Didi have adopted.

The Cyberspace Administration of China said in its July statement that it will work with different agencies to police data security and overseas listings.

The authorities have accelerated a crackdown against overseas listings after Didi was said to have pushed ahead with its debut in June, despite being asked to delay the plans months prior. The State Council, China's highest decision-making body, has said rules for overseas listings will be revised, while publicly traded firms will be held accountable for keeping their data secure.

It remains unclear whether some companies may be exempt from the broader moratorium. Aichi Automobile, an electric-vehicle start-up better known as Aiways, is exploring a US IPO that could occur as soon as this year, Bloomberg News has reported.