Happier days: Jenny Qián Zhìyà 钱治亚, CEO of Luckin Coffee celebrates the company’s Nasdaq IPO in New York May 17, 2019. Reuters/Brendan McDermid
A day after we learned that Nasdaq intends to delist Luckin Coffee following its fraud scandal, pending a hearing panel decision, the company’s stock tumbled further by nearly 40% in premarket trading.
Then this afternoon, the U.S. Senate has passed legislation which could bar some Chinese companies from U.S. stock exchanges. The bill was approved with unanimous consent, and requires companies to establish they are not owned or controlled by a foreign government, and to undergo an audit by the Public Company Accounting Oversight Board.
Senator John Kennedy, Republican from Louisiana, a sponsor of the bill, said on the Senate floor, “I do not want to get into a new cold war … All I want, and I think all the rest of us want, is for China to play by the rules.” In a press release Kennedy’s office said the bill aims “to kick deceitful Chinese companies off U.S. exchanges.”
Chinese companies may turn to markets outside the U.S. as alternatives. Hong Kong is emerging as a leading fundraising hub for Chinese tech companies, and this week the city made big changes to inclusion rules for its flagship Hang Sang index. However erosion of rule of law in Hong Kong could lessen future foreign capital inflows, ultimately impacting Hong Kong’s status as a financial centre.
Hong Kong also faces increasing competition from Shanghai. Last June the Shanghai Stock Exchange launched the Nasdaq-like Star Market which allows pre-profit companies in areas such as AI and cloud computing to list in China for the first time.
For more, see:
- Luckin Coffee shares crash on delisting risk / Reuters
- Luckin stock faces wipeout in rush to sell before delisting / Bloomberg via Caixin
- Senate passes bill to delist Chinese companies from exchanges / Bloomberg (porous paywall)
- Context in yesterday’s Access newsletter: Luckin to be delisted from Nasdaq after fraud scandal.