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Illustration: Sarah Grillo/Axios

Chinese companies will be unable to go public in the U.S. unless they make new risk disclosures, according to a statement released Friday morning from SEC chair Gary Gensler.

Why it matters: Chinese companies, and tech startups in particular, are already under growing pressure from their own government. Now they're also getting squeezed by U.S. officials.

How we got here: SEC commissioner Allison Lee said earlier this week that Chinese companies listed in the U.S. must disclose the risk of Chinese government interference in their business, following its punitive actions against companies like Didi.

  • Just hours before Gensler's statement, Reuters reported: "The SEC has asked companies not to submit any registrations for the issuance of securities until it gives them specific guidance on how to disclose the risks they face in China."

What Gensler said: Chinese companies seeking to register in the U.S. must disclose if they: "Received or were denied permission from Chinese authorities to list on U.S. exchanges; the risks that such approval could be denied or rescinded" and if such approval was rescinded.

  • Such companies also must allow the Public Company Accounting Oversight Board to inspect the issuer's public accounting firm within three years. If PCAOB is unable to do so, the company may be delisted.
  • He also "asked staff to engage in targeted additional reviews of filings for companies with significant China-based operations."

What it could mean, at least for now: Delayed or blocked U.S. IPOs for Chinese companies, several of which are in the post-Labor Day pipeline. Ditto for secondary stock offerings for already-public Chinese companies.

  • It's less clear if this would affect Chinese companies going public in the U.S. via SPAC. The SEC registration process on such deals is technically for the SPAC, not for the company being acquired.
  • For context, Chinese companies have raised nearly $13 billion so far in 2021 via U.S. stock listings, an all-time record.

The bottom line: Chinese companies, and tech startups in particular, have long been supported by both local officials and U.S. markets. Now their friends have become foes.

Go deeper

Nov 5, 2021 - World

LGBT rights group in China halts work amid crackdown on social activism

A gay student poses with a rainbow flag in Beijing in 2019. Photo: Greg Baker/AFP via Getty Images

LGBT Rights Advocacy China, an influential Chinese advocacy group, abruptly announced Thursday it was disbanding but did not disclose why, AP reports.

Why it matters: The group, which advocated for same-sex marriage and the protection of gay rights and provided legal support for the LGBT community in China, is shutting down amid a governmental clampdown on social activism.

Updated 46 mins ago - World

Biden cleans up comments about Russia invading Ukraine

Photo: Doug Mills-Pool/Getty Images

President Biden sought to clarify his suggestion that a "minor incursion" by Russia into Ukraine may not draw the same response as a large invasion, telling reporters Thursday that "Russia will pay a heavy price" if any troops cross the border.

Why it matters: Some officials in Kyiv saw Biden's comments as inviting Russian aggression.

Tina Reed, author of Vitals
59 mins ago - Health

Study finds bias against Black patients written into medical charts

Illustration: Sarah Grillo/Axios

Black patients were more than two-and-a-half times as likely as white patients to have negative descriptors about them in their electronic health record, according to a study published Wednesday in Health Affairs.

Why it matters: The study is further evidence of bias in the U.S. health care system, which can ultimately result in worse care and disparately poor outcomes.

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