Local time on April 21, the U.S. Securities and Exchange Commission (SEC) will be Zhihu, ideal car, shells and other 17 Chinese companies in the "pre-delisting" list, FUTURE Holdings, Nocera, Aqiyi, Baidu, and Kaixin Yuanda Pharmaceuticals and other five Chinese companies from the "pre-delisting list" into the "list of certain delisting". Nocera, Aqiyi, Baidu, and Kaiser Permanente Pharmaceuticals have moved from the "Pre-Delisting List" to the "Definitive Delisting List". The deadline for the 17 companies to submit their comments is May 3, local time.
This is the fifth batch of Chinese companies since March 2022 to be included in the list. It is worth noting that, among them, Zhihu can be described as "woe is not alone", by the SEC "pre-demarcation" after the 22nd to Hong Kong on the first day of listing was broken, closed down 23.58%. In response to being included in the "pre-listing list", a number of companies have responded. Among them, shell responded to the "Huaxia Times" reporter: the company has been actively seeking possible solutions, in the conditions allow, to maintain the company's listing in the U.S. stock market.
Seventeen Chinese stocks are on the U.S. "pre-delisting list"
The SEC determines the "pre-delisting list" based on the Foreign Corporation Accountability Act (HFCAA). These determinations, which are administrative actions taken by the SEC under the HFCAA, indicate that the SEC has determined that Shell, among others, has used an auditor that is not currently able to have audit transcripts reviewed by the U.S. Public Company Accounting Oversight Board (PCAOB) to issue an audit report for fiscal year 2021. Under the HFCAA, if the SEC determines for three consecutive years that a company has issued an annual audit report using an auditor that cannot be reviewed by the PCAOB, the SEC will prohibit the company's stock or ADSs from being traded on U.S. exchanges or over-the-counter (OTC) markets.
The Chinese companies listed as "pre-delisted" under the Foreign Corporation Accountability Act are Zhihu, Novartis Furniture, LOVARRA, Wanchun Pharmaceuticals, Ruixing Coffee, Aurora, Scientific Energy, China Foods, Value Exchange, International, Zerxis, and Zerxis. International, Zerxis Medical Group, Entrepreneur Universe Bright Group, Sino-Bi Energy, China Net Carrier, Sunrider International, Best Group, Ideal Motors and Shell. The deadline for the 17 companies mentioned above to submit their pleadings is May 12, local time.
Additionally, five mid-cap companies, including Futura Holdings, Nocera, Aqiyi, Baidu and Kaixin Yuanda Pharmaceuticals, have moved from the "pre-delisting list" to the "final delisting list". It is worth stating that entering the list is not the same as immediate delisting, and whether or not the companies on the list are actually delisted in the next two years will ultimately depend on the progress and results of the U.S.-China audit and regulatory cooperation.
Ideal Motors, Shell and other responses
In response to the SEC's inclusion in the "pre-delisting list", a number of companies have responded to the 22nd Beijing time. Among them, Shell responded to a reporter from China Times, "The company has been actively seeking possible solutions to maximize the protection of shareholders' interests. Shell will continue to ensure compliance with relevant laws and regulations in China and the United States, and maintain the company's status as a listed company on the New York Stock Exchange as conditions permit."
Shares of Shell fell 7.77 percent on April 21 EST as a result of the incident. Also responding was Ideal Motors. Ideal Motors responded, according to Surfing News, saying, "All U.S.-listed Chinese stocks will be included in this list after they release their annual reports. Being included is not the same as being delisted from the U.S. According to the relevant regulations companies will only be restricted from trading in U.S. stocks if they fail to open their audit drafts to the U.S. for three consecutive years."
Ideal Auto said it has been actively looking for a solution, "On the one hand, it has completed its primary listing in Hong Kong last year, and the shares of the two places are interchangeable, and U.S. stock investors can convert them to hold them in Hong Kong at any time, and the listing status of the primary listing in Hong Kong will not be affected by the relevant U.S. stock regulation (unlike the secondary listing in Hong Kong). On the other hand, it is also actively cooperating with the work related to the audit draft in accordance with the domestic and international regulatory requirements. The above will not have any impact on the company's actual business operations."
Chinese stocks in a "more difficult" situation recently, Chinese stocks in a "more difficult" situation, the share price changes. EST April 21, the three major U.S. stock indexes collectively closed down. As of the close, the Dow Jones index fell 1.05%, the Nasdaq index fell 2.07%, the S&P 500 index fell 1.48%. Among them, Chinese stocks staged a "plunge" scene, the popular Chinese stocks collectively share price decline.
Worthy of attention is that on the evening of April 21, China Securities Regulatory Commission Vice Chairman Fang Xinghai said at the Boao Forum, the recent decline in Chinese stocks, an important reason for the seriousness of the U.S.-China negotiations on audit and regulatory cooperation. Fang Xinghai said that since the new change of the chairman of the SEC in 2021, the negotiation team of the CSRC and the U.S. side of the negotiation is progressing well, and it is believed that a cooperation agreement will be reached in the near future.
To cope with the delisting risk brought by the new U.S. measures, U.S.-listed Chinese stocks have been seeking to return to the A-share or Hong Kong stock markets one after another over the past period of time. According to statistics from China Merchants Securities International, there are currently about 36 of the 280 U.S.-listed Chinese stocks that will meet the requirements for a secondary listing in Hong Kong in the next two years.