SEC Names 5 Chinese Stocks to Potentially Delist — Alibaba Stock Impacted
The SEC is considering delisting five Chinese stocks based on a lack of financial transparency. What stocks are being considered? Why was Alibaba stock impacted?
March 11 2022, Published 11:30 a.m. ET
Chinese stocks listed in the U.S. have been under intense scrutiny for more than a year. Strict governmental regulations in the companies’ homeland have pushed stock prices lower. Now, the SEC has listed five Chinese stocks that could potentially delist in the future.
Major exchanges in the U.S. have minimum stock prices that companies must adhere to or else risk delisting, but that’s not all. To stay listed, foreign companies must be transparent with their books, and some Chinese companies aren't complying. Here’s the list of companies that could get the boot, according to the SEC.
Alibaba is excluded from SEC’s delist warning, but the move impacted BABA stock.
Alibaba Group Holding Ltd. (BABA) is dual-listed on both the NYSE (with ADRs) and The Stock Exchange of Hong Kong (HKEX). In the U.S., BABA stock has been plummeting since October 2020. In the approximately year and a half since then, BABA stock is down 71.64 percent as of March 11.
A good chunk of those losses — 12.72 percent — have come in the past day since the SEC published its list of Chinese stocks that could delist.
The SEC named five Chinese companies that could delist.
In December 2020, U.S. lawmakers passed the Holding Foreign Companies Accountable Act, which requires foreign companies publicly listed in the U.S. to allow auditors to inspect a company’s financial books. Since the law went into effect, the SEC has compiled a list of companies who aren't complying and risk delisting.
The following five companies have until March 29 to supply counterevidence or risk delisting after three straight years of noncompliance.
1. BeiGene Ltd. (BGNE)
BeiGene is an oncology biotech company working on cancer treatments. The stock dropped 8.44 percent by mid-morning March 11. This adds to a YTD loss of 37.28 percent.
2. Yum China Holdings (YUMC)
Yum China Holdings is a Fortune 500 company that owns a chain of 10,600 fast-food restaurants across the world. Originally spun off from Yum!, the company is down 11.05 percent on March 11 and 20.15 percent YTD.
3. ZaiLab Ltd. (ZLAB)
Biopharmaceutical research company ZaiLab has a range of specialties, including oncology, autoimmune disorders, infectious diseases, and neurological disorders. ZLAB shares are down 14.25 percent on March 11 and 52.73 percent YTD.
4. ACM Research (ACMR)
The CEO of smart megasonic wafer cleaning technology company ACM Research Dr. David Wang told reporters, “ACM has already begun to interview potential U.S. auditors to comply with the guidelines.” Still, ACMR stock is down 6.82 percent on March 11 and 33.67 percent YTD.
5. Hutchmed Ltd. (HCM)
Biopharmaceutical company Hutchmed stock is down 7.87 percent on March 11 and 52.15 percent YTD.
How could Chinese stocks delisting impact U.S. investors?
Any U.S. investor holding on to these Chinese companies is losing value, but a potentially even worse scenario exists. If the owned stock delists and relists on a foreign exchange (such as an over-the-market exchange), investors will need to transfer their securities to a brokerage that works with the exchange.
The Chinese stock avalanche has been a long time coming, and increased scrutiny for foreign companies on U.S. exchanges — including China’s ally Russia — will likely continue.