Chinese companies applying to go public in the US are facing increasingly detailed questions from the Securities and Exchange Commission about their offshore corporate structures.
Many of the SEC's queries have focused on the nature and direction of cash flows through so-called variable interest entities, which allow Chinese companies to circumvent Beijing's restrictions on foreign ownership, Bloomberg reported, citing sources.
SEC officials have asked the firms to quantify transfers and dividends between the parent company and other entities, as well as their respective balances and any tax implications
The regulator has also asked for additional disclosures on political and regulatory risks in China, one of the sources said, adding that new applicants may face as many as 20 more questions than was typical before this month.
The questions offer an early look at how SEC chair Gary Gensler is following through on a pledge late last month to push for more disclosures on Chinese initial public offerings in New York.
While some listing hopefuls may take comfort in the fact that the SEC is still engaging with them, it remains unclear whether regulators will ultimately sign off on new Chinese offerings. Gensler said on August 16 that he has asked SEC staff to "take a pause for now" in green-lighting IPOs that use the VIE structure.
Meanwhile, Chinese companies were rushing to go public in Hong Kong, with Chinese artificial intelligence company Yitu Technology considering an initial public offering in Hong Kong after a tightening regulatory scrutiny stalled an earlier attempt to list in Shanghai.
The AI firm could seek a valuation of about US$4 billion in the Hong Kong share sale.
Yitu, whose application for a Star board IPO was withdrawn last month when regulators failed to give their approval after a review process, could file for a listing as soon as later this year.
Meanwhile, Insight Lifetech filed a listing application in Hong Kong. The loss-making medtech company mainly develops precision solutions with the potential to transform the diagnosis and treatment of cardiovascular diseases.
It counts Sequoia Capital, Decheng Capital, SDIC Unity Capital, and Qiming Venture as its backers.
Also, Chinese artificial intelligence startup SenseTime is planning to file for an up to US$2 IPO in Hong Kong as soon as the end of this month, Reuters reported.
In other news, Shanghai HeartCare Medical Technology (6609) set its IPO price at HK$171, which is the upper limit of the IPO price, to raise a net proceeds of about HK$1 billion.
The new shares dipped in the grey market by roughly 15 percent before its market debut.
Gary Gensler asked staff to take a pause in green-lighting IPOs that use a VIE structure . REUTERS
