- Nasdaq Stock Market, the second largest stock exchange in the world after the New York Stock Exchange, has spurred into action to halt IPO listings of small-cap Chinese companies. They will be subject to additional reviews, and approval on the exchange is suspended until further notice.
- This is because these stocks rise up to 2,000% in their debuts, followed by a decline shortly. For example, the shares of more than 20 recently listed companies rose over 100% on their first day of trading. These include Hong Kong’s fintech company AMTD Digital Inc., and Chinese garment maker Addentax Group Corp. However, both of them have since lost more than 98% of their value. All in all, these price swings have led to a heightened scrutiny from Nasdaq.
Why it matters
Small IPOs often get a lot of demand from individual investors. Recently, more than 30 companies, mostly from China, submitted initial public offering applications in the United States, which would secure each company about $40 million. Through these checks, Nasdaq seeks to safeguard investors’ interests, maintain confidence in its market, and nip fraud in the bud.
