Zhihu, Ideal and 17 other companies on SEC's "pre-delisting" list
Zhihu, Ideal and 17 other companies have been placed on the SEC's "pre-delisting" list if they do not file, or file documents that do not meet the SEC's requirements, on the "definitive delisting" list. Companies on the "Delisting Determination List" will face immediate delisting after disclosure of their 2023 annual reports (early 2024) if they fail to file or file documents that do not meet the SEC's requirements. The SEC has placed 17 more companies on its "pre-delisting" list, including Knowledge and Ideal.
Knowing, Ideal and 17 other companies on SEC's "pre-delisting" list1 On April 21st, the U.S. Securities and Exchange Commission (SEC) added Ideal Motors, Best Group and Shell to its "pre-delisting" list, marking the first time since March that Ideal Motors, Best Group and Shell have been added to the SEC's "pre-delisting" list.
The SEC added Ideal Motors, Best Group, and Shell to its "pre-delisted" list, the fifth batch of Chinese companies to be included since March.
The specific list is: Zhihu, Novartis Furniture, LOVARRA, Wanchun Pharmaceuticals, Ruixing Coffee, Aurora, Scientific Energy, China Foods, Value Exchange International, Zerxis Medical Group, Entrepreneur Universe Bright Bright Group, China-Belgium Energy, ChinaNetLine, Sunrider International, Best Group, Ideal Motors, and Shell.
The SEC claimed that the deadline for the 17 companies mentioned above to submit their pleadings was May 12, local time.
Under the Foreign Corporation Accountability Act (FCAA), previously announced by the SEC, companies placed on the "definitive delisting list" are required to file the SEC's required documents within three years (counting from the disclosure of their first annual report and with 2021 as the first year). If a company on the Definitive Delisting List fails to file or files documents that do not meet the SEC's requirements, it would theoretically face immediate delisting after disclosure of its 2023 annual report (early 2024).
In addition, due to the expiration of the pleading date, Futura Holdings, Nocera, Aichi, Baidu, and Kaixin Yuanda Pharmaceuticals have moved from the "Pre-Delisting List" to the "Definitive Delisting List". These five companies are the third batch of Chinese stocks to be added to the list.
In December last year, the US Securities and Exchange Commission (SEC) issued a new rule requiring Chinese companies listed on US stock exchanges to disclose details of their ownership structure and audits, even if the information comes from the relevant foreign jurisdiction; the rule was seen as a response to the Foreign Corporation Accountability Act, which was passed by the US Congress in December 2020.
In response, the foreign ministry said that the U.S. approach is another concrete action of political suppression of Chinese companies, and another concrete manifestation of U.S. suppression to curb China's development. We are firmly opposed to this.
The politicization of securities regulation is detrimental to both the public and the private sector, and will deprive U.S. investors of the opportunity to invest in many of the world's fastest-growing companies, as well as deprive U.S. professional services organizations of many of their business opportunities. The U.S. side should recognize the situation and provide a fair, just and non-discriminatory environment for foreign enterprises to invest and operate in the U.S., instead of setting up heavy obstacles. China will take necessary measures to safeguard its legitimate and legal rights and interests.
At a special meeting of the State Council Financial Stability Development Committee held in mid-March this year, the FSC emphasized that, regarding China's stocks, at present, the Chinese and US regulators have maintained good communication, and positive progress has been made, and are working on the formation of a concrete cooperation program. The Chinese government continues to support all kinds of enterprises to list abroad.
17 companies, including Zhihu and Ideal, added to SEC's "pre-delisted" list2On Thursday, the U.S. Securities and Exchange Commission (SEC) added 17 more Chinese companies to its "pre-delisted" list. This is the fifth batch of Chinese companies to be added to the pre-delisting list since March.
The HFCAA states that a company will be delisted from a U.S. exchange if the Public Company Accounting Oversight Board (PCAOB) fails to properly audit the company for three consecutive years. Companies on the Definitive Delisting List will face immediate delisting after disclosure of their 2023 annual report (early 2024) if they fail to file or file documents that do not meet SEC requirements.
The new list of Chinese stocks on the "pre-delisting" list includes: Zhihu, Novartis Furniture, LOVARRA, Wanchun Pharmaceuticals, Ruixing Coffee, Aurora, Science Energy, China Foods Holdings, Value Exchange International, Inc. Elsie West Medical Group, Entrepreneur Universe Bright Group, Sino-Bi Energy, China Network Carrier Line, Sunrider International, Best Group, Ideal Motors, and Shell.
Previously, on March 8, the SEC put five companies on the "pre-delisting list", including Bajaj Shenzhou, Yum China, Zaidin Pharmaceuticals, Shengmei Semiconductor, and Hwang Pharmaceuticals; on March 23, the "pre-delisting list" added microblogging companies; on March 31, Baidu, Qiyi, and Futura. On March 31st, five companies were added to the list, including Baidu, Aiki, Futura Holdings, Kaixin Yuanda Pharmaceuticals and Nocera.
On April 12, Microvast, China Automotive Systems, Dah Sing Energy, Konrad Bio, One Financial Account, Greentree Biotechnology, Legend Bio, Sohu, Melco, Melco Burson-Marsteller, Logiq, and NOAH were added to the Pre-Delisting List.
It is understood that the SEC's current push for the Foreign Corporation Accountability Act (FCAA) focuses on requesting audit transcripts from foreign companies, most of which were originally subject to territorial jurisdiction.
17 more companies on SEC's "pre-delisting" list3
According to the latest disclosure on the SEC's website, companies such as Ideal Motors have joined the "pre-delisting list".
The specific list disclosed on the SEC's website shows that Zhihu, Novartis Furniture, LOVARRA, Wanchun Pharmaceuticals, Ruixiang Coffee, Aurora Mobile, Scientific Energy, China Foods, Value Exchange International, Zerxis Healthcare, Entrepreneur, Universe Bright Group, and China Bizarre. Universe Bright Group, China-Belgium Energy, China Network Carrier, Sunrider International, Best Group, Ideal Motors and Shell are all included.
In response, Shell said it has been actively seeking possible solutions to maximize the protection of shareholders' interests. The company will continue to ensure that it complies with the relevant laws and regulations of China and the United States, and, where conditions permit, maintains its New York Stock Exchange . . listed on the New York Stock Exchange.
Screenshot of SEC website
The SEC said the deadline for the 17 companies to submit their pleadings is May 12, local time.
Four batches of 23 companies have already been placed on the so-called "pre-delisting list". If the company can not prove that they do not have the conditions to be delisted, it will be put on the "list" to determine the delisting. This is the first time I've ever seen a company like this one.
Fortune Holdings released a statement saying that it has been paying attention to the requirements of the U.S. Foreign Corporation Accountability Act (HFCAA) and evaluating its potential impact on the company, and is actively exploring options to maintain the company's listing status, and that the entry into the temporary list does not imply that the company's American Depositary Shares (ADSs) will be subject to mandatory delisting and de-listing in the near future.
QiYi responded that this is a routine procedure for US regulators to enforce the previously announced Foreign Corporation Accountability Act and related implementing regulations, and we have been paying attention to it. Being on the provisional list does not mean that the company's ADSs will be subject to mandatory delisting and delisting in the near future. We will actively seek a solution to protect our shareholders' interests.
Baidu announced that it has been actively pursuing possible solutions to maintain its listing on both the Nasdaq market and The Stock Exchange of Hong Kong Limited, as conditions permit.
Sohu said it recognizes that the U.S. Securities and Exchange Commission (SEC) placed the company on the list of determinations based on the Foreign Corporation Accountability Act and does not intend to contest the SEC's interim determination. At the same time Sohu said it is exploring options to potentially delist the ADSs. Investors cannot be assured that delisting or the alternative course of action taken, if any, will not adversely affect the market value of ADSs. Alternative courses of action are being explored but have not yet been finalized as to what action the company may take.
On the 18th, Zhang Chaoyang, founder, chairman of the board and chief executive officer of Sohu, posted a circle of friends saying that Sohu is not going to be delisted.
On March 31, the SEC had responded to the matter, after learning from the SEC that this is a normal procedure for U.S. regulators to implement the Foreign Corporation Accountability Act, and that whether 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.