China sets new rules for overseas IPOs. What it means for DiDi, Alibaba and others.
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The rules aim to clarify the process of listing overseas after DiDi Global’s US IPO sparked a regulatory probe in China.
Zhe Ji/Getty Images
China has announced new rules for overseas IPOs that may trigger Chinese companies to resume listing in New York.
Under the new rules, the China Securities Regulatory Commission (CSRC) will review everyone Applications for approval abroadvalid from March 31st. The regulator has the power to block such IPOs, and the rules make it clear that listings must not endanger national security.
“China remains committed to further opening up its capital markets,” the CSRC said on Friday.
Chinese overseas listings have since screeched to a halt
DiDi Global
‘s US IPO in 2021. The ridesharing company’s decision to go public in New York prompted Chinese authorities to launch an investigation into alleged violations of the country’s privacy and national security laws.
In July 2021, Beijing announced new rules requiring tech companies with more than 1 million users to undergo cybersecurity screening before going abroad.
China also banned DiDi from adding new users, and the company was eventually delisted from the New York Stock Exchange last year.
After China’s fierce reaction to DiDi’s listing, the new rules offer hope to Chinese companies seeking overseas listings. There is now a formal process, but it involves another regulatory hurdle to overcome.
As for DiDi, the company is unlikely to return to the US after its ill-fated 11-month stint on the New York Stock Exchange.
Chinese companies already listed on the US market, such as
Alibaba
(Ticker: BABA) and
JD.com
(JD) will not be affected by the new rules applying to new entries.
However, companies already listed outside of China must register with the CRSC. The regulator will also oversee companies with VIE (Variable Interest Entity) structures, such as
Alibaba
And
JD.com
.
A VIE structure allows companies to bypass Beijing’s foreign investment restrictions.
The regulator added that it will allow filings from VIE structured entities and assist them in raising capital domestically and internationally, Reuters reported.
Alibaba
The stock (9988.Hong Kong) fell 2.6% in trading in Hong Kong on Friday after rules were laid and was broadly flat on Monday.
JD.com
The stock (9618.Hong Kong) fell 2% on Friday and 1.5% on Monday.
Write to Callum Keown at callum.keown@barrons.com
https://www.barrons.com/articles/china-ipo-didi-alibaba-jd-stock-4ea53223?siteid=yhoof2&yptr=yahoo China sets new rules for overseas IPOs. What it means for DiDi, Alibaba and others.
