On July 29, the United States Securities and Exchange Commission (SEC) updated its delisting watchlist, adding four China concept stock companies including Alibaba, MOGU Inc., Cheetah Mobile and Boqii.
Alibaba issued a statement on the morning of August 1, acknowledging its inclusion on the watchlist and assuring that it would maintain a watchful eye on market developments, comply with applicable laws and regulations, and strive to maintain its dual listing status on both the NYSE and the HKEx. On July 26, the company announced that its board of directors had authorized its management to submit an application to the HKEx as a primary listing venue. This is expected to be effective by the end of 2022.
As of the close of trading on July 29, the four companies showed varying share price performance. Alibaba‘s share price plunged more than 11%, with a cumulative decline of more than 20% this month. MOGU Inc. closed up 3.45%, Cheetah Mobile rose 0.54% while Boqii fell 8.45%.
Up to now, the SEC has named 159 China concept stock companies on its delisting watchlist. On March 11 this year, the SEC announced that five companies – BeiGene, Yum China, Zai Lab Limited, ACM Research (Shanghai) – had been added to the watchlist according to the Holding Foreign Companies Accountable Act. Later, the SEC added Baidu, JD.com, Bilibili and Pinduoduo to the list.
According to the Holding Foreign Companies Accountable Act, foreign issuers listed in the US that engage an accounting firm from a foreign jurisdiction to issue an audit report that fails to meet the Public Company Accounting Oversight Board’s (PCAOB) audit requirements for accounting firms will be included on the delisting list.
Named companies have 15 days to prove to their eligibility to the SEC; if unsuccessful, they will be transferred to the definitive list. Accordingly, the deadline for the recently-named companies to submit disputed evidence is August 19, local time.
If a company makes the list for three consecutive years, it will theoretically be unable to trade on US stock exchanges and will be forcibly delisted after disclosing its 2023 annual report (early 2024). The 153 Chinese concept stock companies included in the pre-delisting list have already been transferred to the definitive list because they could not prove that they are not eligible for delisting within the deadline.