Nasdaq’s Clampdown Could Drive Chinese Penny Stock Firms Back Home

MoFo partner Rongjing Zhao was quoted in a recent article “Nasdaq’s clampdown could drive Chinese penny stock firms back home” published on DealStreetAsia.

The Nasdaq’s proposed rule, aimed at clamping down on penny stocks trading below $1, could lead to China-based companies considering delisting and relisting on stock exchanges in China or Hong Kong. Read Proposed Changes in Penny Stock Delisting Rules: Proactive Steps Needed to Avoid Disruptions to learn more about the proposed rule change.

According to Rongjing, there are currently around 400 companies trading at the $1 price point that are at risk of being delisted, and of those companies, about 50 are headquartered in China. Business‑to‑business (B2B), business-to-consumer (B2C), information technology, and financial services comprise most of the approximately 50 Chinese penny stock companies listed on Nasdaq.

Rongjing also suggested that trade sales could be a practical exit route for these companies, which can consider going private through a private equity fund first and then finding an additional buyer at a later stage to complete the exit transaction.

MoFo has extensive experience advising clients on privatization and other complex transactions involving U.S.-listed companies with an Asia-Pacific nexus. We regularly assist companies in evaluating their options and developing strategies in response to regulatory changes. You may read more about our experience at: Coming Home – Overview of Going Private Transactions of U.S.-Listed Chinese Companies.

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