THE Nasdaq stock exchange in the U.S. is planning listing requirements that will make it harder for small Chinese companies to list in New York, after a flood of tiny initial public offerings (IPOs).

As part of proposed changes, companies operating primarily in China will need to raise at least US$25 million in initial public offerings to list on the exchange, Nasdaq said late Wednesday local time.

There have been few large Chinese IPOs in the U.S. since the fallout around ride-hailing company Didi’s New York listing in 2021. But in 2024, 35 small China-based companies listed in New York, roughly twice the 17 U.S.-based microcap listings, Renaissance Capital said in December.

Microcaps typically refer to stocks with market capitalizations of between US$50 million and US$300 million, meaning the companies raised only a few million in the initial public offering.

Nasdaq noted the Chinese listings pose greater risk to U.S. investors due to U.S. inability to take legal action “against entities and individuals involved in potentially manipulative trading activities in these securities.”

“Further, the Exchange has observed that Chinese companies listing on Nasdaq in connection with an IPO with an offering size below US$25 million have a higher rate of compliance concerns,” Nasdaq said.

The U.S. Securities and Exchange Commission needs to formally approve Nasdaq’s proposal. Companies already in the IPO process would then have 30 days to complete the process under prior rules, Nasdaq said, while all subsequent listings would have to comply with the changes.

While China has sought to encourage domestic financial development, it has also been cautious about the overseas financing of domestic firms, including stock offerings. New policies in the last three years have required Chinese companies to get the securities regulator’s approval for overseas listings, especially if their business has a large domestic user base.(SD-Agencies)