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The U.S. Securities and Exchange Commission (SEC) added 17 Chinese companies including Li Auto, Zhihu, and Best Inc. to its delisting watchlist on Thursday 21 April. This is the fifth group of China concepts stock companies to be put on the list since March.
The 17 companies are Best Inc., Li Auto, KE Holdings, Zhihu, Nova Lifestyle, LOVARRA, BeyondSpring Inc., Luckin Coffee Inc., Aurora Mobile Limited, Scientific Energy, China Foods Holdings Limited, Value Exchange International, JRSIS Health Care Corporation, Entrepreneur Universe Bright Group, CBAK Energy Technology, and AMTD IDEA Group.
Why it matters
The SEC claimed that the deadline for the 17 companies to file their arguments was 12 May. Chinese new energy vehicle firm Li Auto responded on Friday 22 April stating that it was actively looking for solutions while ensuring that the company’s business operation remains unaffected. KE Holdings responded the same day that it would seek possible solutions to protect its shareholders’ interests.
Companies listed on the “determined delisting list” are obligated to file reports required by SEC within three years. If the companies on this list do not submit the documents, or if the submissions fail to meet SEC requirements, they will face immediate delisting after disclosing their 2023 annual report (in early 2024).
Context
According to SEC, it is a normal procedure for local regulatory authorities to implement the Holding Foreign Companies Accountable Act (HFCAA). Whether the listed companies will eventually withdraw from the stock market in the next two years depends on the progress and results of Sino-U.S. audit supervision cooperation.
