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Baidu added to list of Chinese companies facing US stock exchange delisting
Vid-streamer iQIYI also earns a place
Chinese search giant and AI cloud company Baidu has landed on the US Securities and Exchange Commission's provisional list of companies it might de-list because of opaque disclosures.
The name of the law that permits such listings is the Holding Foreign Companies Accountable Act (HFCAA). The act requires some companies that issue securities in the USA to allow local auditors to understand how many of its shares are owned by governments, if governments exercise control over the company, and whether any officials or regulations are connected to the Chinese Communist Party.
Baidu filed its annual report a couple of days ago, and in a statement today suggested that document has somehow earned it a place on the SEC's list.
The company, which dominates China's search market and has built a well-regarded AI-as-a-service cloud, has stated it will "continue to comply with applicable laws and regulations in both China and the United States, and strive to maintain its listing status on both Nasdaq and the HKEx."
Just how it will do so is not explained, making compliance tricky – Beijing insists that party representatives be present in leadership positions at large companies. While the SEC only moves to de-list companies after three years of non-compliance, Baidu has some quick explaining to do.
So does fellow Chinese company iQIYI, a video-streaming outfit also listed on NASDAQ, and as of Wednesday on the SEC's HFCAA list.
Baidu shares dropped eight per cent on the news and iQIYI tumbled almost ten per cent.
The companies' troubles come just a week after Chinese social media company Weibo also earned itself a spot on the HFCAA list.
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Chinese companies just keep finding trouble in the US. Carriers China Telecom and China Mobile were last week named threats to national security and Pacific Networks was recently ordered out of the country. A rare piece of good news saw networking kit-maker ZTE excused some sanctions – but the US still regards its kit as so risky it is paying local telcos to replace it with other products.
Baidu and iQIYI do very little business in the United States. The effect of any de-listing would therefore be to deny them access to a major source of capital. That would hurt, but it may be a wound Beijing will ask them to bear because in recent months China's government has been reluctant to allow tech companies to list offshore over fears that Chinese citizens' data could be compromised.
The US, for its part, uses the HFCAA to raise the regulatory bar for Chinese companies seeking US listing, to deny access to US capital for companies controlled by the Communist Party. ®