Baidu added to SEC list of firms facing possible delisting

[WASHINGTON] The Securities and Exchange Commission (SEC) on Wednesday (Mar 30) added Baidu to a growing list of companies that may get kicked off American stock exchanges because of Beijing's refusal to permit US officials to review their auditors' work.

The SEC's publication of the businesses' names is required by a 2020 US law that started a 3-year clock for firms to comply with inspection requirements that cover all public companies in the US. The SEC also added Futu Holdings Limited, Nocera, iQIYI and CASI Pharmaceuticals to its provisional list for possible delisting.

Wall Street's main watchdog has long been expected to crack down on about 200 New York-traded firms with parent companies based in China and Hong Kong because the jurisdictions refuse to allow the inspections. Still, the SEC's recent publication of companies has jarred investors who'd been hoping for a deal between regulators in Beijing and Washington.

Baidu's New York-listed shares extended their losses to as much as 2.7 per cent on Wednesday, while the Nasdaq Golden Dragon China Index pared gains to 0.4 per cent at 1.18 pm in New York.

Wednesday's additions bring the total number of firms identified by the regulator to 11.

The US and China have been at odds for 2 decades over the mandate that all companies that trade publicly in America grant access to audit work papers. Since Congress passed the law in 2020, the Public Company Accounting Oversight Board, which oversees auditors, and the SEC have been laying the groundwork for identifying companies that don't comply.

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Firms face removal if they shirk requirements for 3 straight years, meaning they could be kicked off the New York Stock Exchange and Nasdaq as soon as 2024.

Critics say Chinese companies enjoy the trading privileges of a market economy - including access to US stock exchanges - while receiving government support and operating in an opaque system. But regulators in Beijing argue that Chinese national security law prohibits them from turning over audit papers to US regulators.

For its part, Baidu, China's online search leader, has been hammered by Beijing's crackdown on private industry. The company is in the process of transitioning from a marketing company to a tech supplier.

As one of the earliest and largest Chinese tech giants to go public in New York, its addition to the SEC list sends a stark warning to smaller peers. BLOOMBERG